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Capella is an online post secondary education services company. Capella offers a variety of doctoral, master's and bachelor's programs in markets such as health and human services, business management, technology and education. The company went public November 15, 2006 with 4,600,000 shares offered and
The first of the following charts shows the increase in value of the company over the last almost six months. The second chart compares the value of each student based on its market cap compared to the cash flow produced by each student.
To value the progress of a company on the cash flow basis divided by the number of students may be unconventional, but in this industry it may be very appropriate. With online education being highly technical, capital improvements are always necessary to stay competitive. Therefore, cash flow may be a better measurement than EBITDA of the true earning power of sold at an initial public offering price of $20.00 per share. On May 16, 2007, the selling shareholders and the company put 3,485,000 shares on the market at a price of $36.00 per share. As of 5/22/07 the stock closed at $42.22. The financial statement below indicates strong growth over the last several years. Capella. As indicated by the chart below, the value per student based on a market cap has dramatically increased over the last almost six months, while the cash flow per student has declined over the same six month period.
There may be other factors such as pricing increases that have not taken effect, or seasonality of the cash flow that would affect the cash flow per student. However, if you believe that cash flow per student is a valid measurement of overall company performance, in the long run, cash flow per student must increase significantly or the market price of the stock will fall. Has Capella come out of the gate like a sprinter with a pace sustainable for only 50 to 100 meters? Or is Capella like a marathon runner, capable of sustaining its grueling growth pace over the long run?
