K12 Inc. (NYSE: LRN) offers
proprietary curriculum, software, and educational services for online delivery to students in kindergarten through 12th grade. Products include online public schools and individualized supplemental programs offered through traditional public schools. The firm also operates the K12 International Academy, a diploma-granting online private school. Courses cover core subjects, such as English, math, science, history and art. K12 serves more than 40,000 students.
The company pleased investors last week, when it reported a fiscal Q4 loss of a penny per share and revenues of $56.5 million. Analysts had been looking for a five cent per share deficit and sales of $47.8 million. Management also said it expected enrollment growth to drive FY09 revenues past $300 million ($283.12M consensus). Argus subsequently reiterated its "buy" rating on the shares and boosted its price target to $33.
The K12 share
price popped on the news and then began defining a bullish "pennant" consolidation pattern. Stocks often leave pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Altogether, brokers recommend the issue with three "strong buys" and four "buys". Analysts see a 57% growth rate, through the next year. The LRN Sales Growth rate (58.71%), Net Profit Margin (14.93%), Return on Assets (26.13%), Return on Investment (34.43%) and Return on Equity (37.11%) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 47% of the outstanding shares. Since going public last December, the stock has traded between $16.50 and $31.00. A stop-loss of $24.45 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold a position in the stock discussed above.
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