American Public Education, Inc. APEI seems to be faring well in the competitive education market, notably evident from its share price performance in the past three months. During the said time frame, APEI stock gained 10.4%, outperforming the Zacks Schools industry, the broader Zacks Consumer Discretionary sector and the S&P 500 Index. The detailed price performance is shown in the chart below.

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The company’s upward trend is supported by its successful marketing efforts and the execution of enrollment strategies, accompanied by an increase in registrations by military-affiliated students utilizing VA. The positive results from these initiatives and the robust demand trend are reflected in the increased enrollment across the American Public University System (APUS) and Hondros College of Nursing (HCN) segments. Furthermore, strategic cost optimization efforts to counter the ongoing inflationary pressures and foster demand are boding well.

Notably, during the past three months, APEI also outperformed some of the other industry players, namely Lincoln Educational Services Corporation LINC, Grand Canyon Education, Inc. LOPE and Strategic Education, Inc. STRA. During the said time frame, shares of Lincoln and Grand Canyon inched up 2.3% and 2.2% respectively, while Strategic Education tumbled 12.8%.

However, American Public’s in-house capabilities and market trends are being partially pressurized by headwinds in the form of soft enrollment trends in the Rasmussen University (RU) and the Graduate School USA (GSUSA) segments. Despite facilitating cost-optimization strategies, the company is still being affected by increased costs and expenses due to the lingering inflationary pressures in the market.

American Public’s Driving Factors

Upbeat 2025 View: After witnessing notable top-line growth in the fourth quarter and full year of 2024, backed by increased registrations and enrollments, American Public laid out an upbeat first quarter and 2025 outlook, boosting investors’ sentiments. For the first quarter, the company expects total revenues to increase 4-6% year over year to $161-$163 million, with APUS’ total net course registrations reflecting growth between 1.5% and 3% and HCN’s total expectedly to increase about 10%. Also, it expects RU’s student enrollment to be up 7% year over year, including on-ground healthcare enrollment increasing 3% to 6,500 and online enrollment rising 11% year over year to 8,000.

For the first quarter, it anticipates earnings per share to be between nine cents and 17 cents against a loss of six cents per share reported a year ago. For 2025, APEI expects total revenues to grow 4-6% year over year to $650-$660 million. Adjusted EBITDA is expected to be between $75 and $85 million, reflecting 4-18% growth year over year.

Robust Enrollment Trends: American Public has been registering impressive enrollment growth at APUS and HCN. Net course registrations at APUS increased about 2.9% to 378,400 year over year in 2024. The robust trend is attributable to an increase in registrations by military-affiliated students utilizing VA.

Furthermore, the HCN segment witnessed enrollment growth of about 14.9% from 2023, mainly due to the continued enrollment growth at the Detroit, MI campus that opened in October 2022, the Dayton, OH campus, which relocated in 2023, and the Columbus and Toledo campuses, in Ohio, which relocated in 2024.

Cost Optimization Efforts: American Public has undertaken several initiatives to address increasing cost pressure. In January 2025, this education provider announced a strategic move that will help it realize revenues and cost synergies over the long term. It aims to combine the three degree-granting institutions, APUS, RU and HCN, into a single consolidated institution, offering simpler operations.

Furthermore, to optimize its balance sheet position, the company has undergone various activities, including closing the underperforming campuses, terminating expensive leases and contracts, and having two corporate buildings held for sale. APEI believes that by strategically working on optimizing its costs and maintaining a healthy balance sheet, it can increase its earnings growth in 2025 and beyond.

APEI Trading at a Premium

American Public is currently trading at a premium compared with the industry peers on a forward 12-month price-to-earnings (P/E) ratio basis. The premium valuation indicates that the stock is trading above its industry peers, making it difficult for investors to figure out a suitable entry point. However, the overvaluation of APEI stock compared with its industry peers indicates its strong potential in the market, given the favorable trends backing it up. This trend justifies its valuation, validating its Value Score of A.

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Headwinds to APEI’s Prospects

Despite being favored by macro aspects and undergoing strategic business initiative implementation to drive enrollment, American Public’s prospects are marred to some extent by various negative aspects.

The company’s performance is partially hurt by lower contributions from the RU segment and GSUSA. Under the RU segment, On-ground Healthcare has been witnessing lower demand since the addition of this segment, with enrollments declining 7.5% year over year in 2024. This led to the RU segment’s enrollment to decline 1.3% year over year. The overall decline in on-ground enrollment can be attributed to self-imposed caps on nursing student enrollment and the overall environment in which RU operates, as a result of the effects of regulatory matters and competition. Also, during the said year, the GSUSA segment’s revenues decreased 8.4% year over year to $24 million.

Moreover, an elevated inflationary scenario is pressurizing the company’s bottom line despite its cost-managing initiatives. In 2024, APEI’s general and administrative expenses, along with instructional costs and services, grew year over year by 10.7% to $142 million and 1% to $295.7 million, respectively.

Estimate Trend of APEI

The earnings estimate trend for 2025 has moved down in the past 30 days by 5.9%, indicating bearish sentiments amongst the analysts. However, despite this decline, the year-over-year growth rate for the 2025 earnings estimate currently stands at 130.9%, with the first quarter indicating 350% growth.

Earnings Estimate Revision

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The year-over-year uptrend reflects APEI’s successful efforts in managing its costs to some extent and leverage from increasing the top line.

Should You Consider APEI Stock: Yay or Nay?

Per the discussion above, APEI’s performance is benefiting from the strong demand for its product offerings, backed by marketing efforts and diversified offerings. This is reflected in the robust registrations in the APUS segment and enrollments in the HCN segment. Also, the continuous efforts to counter the increasing costs and expenses are boding well.

However, the elevated inflationary market scenario seems to be continuously taking a toll on the company, keeping it on its toes regarding cost management. Also, soft contributions from the RU segment add to the headwinds.

Thus, considering both sides of the market scenario, it is prudent for existing investors to hold on to this Zacks Rank #3 (Hold) company’s shares for now, whereas new investors might want to wait for a more favorable entry point.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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