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MINNEAPOLIS, Minn.-October 2, 2003 - In his latest edition of the Valuation Conundrum, released today, U.S. Bancorp Piper Jaffray Senior Learning Services Analyst Mark Marostica provides insight into what he believes are the drivers of the valuation differences among public post-secondary education companies.

Marostica's proprietary attribute analysis and scoring methodology, the cornerstone of his study, assigns numerical composite scores to companies based on results from 29 attributes in seven categories, which include: program quality, student quality, revenue visibility, enrollment characteristics, regulatory risk, campus-related characteristics and financial quality. Companies with higher composite scores are considered more favorable than those with lower scores. Marostica then compared the composite scores with each company's price-to-earnings (P/E) ratio.

Through his analysis, Marostica concluded there is a meaningful correlation between a post-secondary education company's composite attribute score and its P/E ratio. "Put simply, we have found that companies with higher composite attribute scores generally trade at higher P/E ratios," said Marostica. "We believe investors should be willing to pay more for a company with a higher composite attribute score. In addition, we believe our analysis will help investors identify and explain "valuation disconnects"-- instances in which a company's composite attribute score is not aligned with its P/E ratio."

In this third edition of the Valuation Conundrum, Marostica's attribute analysis resulted in the following post-secondary education company ranking:

Rank Company Name
1 Apollo Group, Inc. (APOL, Strong Buy, $68.17, #>)
2 Strayer Education, Inc. (STRA, Market Perform, $98.79, #>)
3 Career Education Corporation (CECO, Strong Buy, $47.72, #>=)
4 Corinthian Colleges, Inc. (COCO, Strong Buy, $59.26, #>=)
5 ITT Educational Services, Inc. (ESI, Outperform, $49.20, #>=)
6 Education Management Corporation (EDMC, Outperform, $60.65, #>=)
7 Sylvan Learning Systems, Inc. (SYLV, Outperform, $28.51, #>=)
8 DeVry Inc. (DV, Underperform, $23.16, #>)

As a result of his analysis, however, Marostica is downgrading Strayer Education to Market Perform from Outperform. "We believe STRA shares have been "bid up" over the last several weeks due to the STRA's limited float (10.7 million shares), coupled with Strayer's relatively high perceived investment quality as captured by our attribute analysis," said Marostica. "While Strayer had the second highest composite attribute score in our analysis (second only to Apollo) our valuation analysis flagged Strayer as an outlier given STRA's relatively high calendar 2004 estimated P/E (39.6 times)."

In addition, Marostica is raising his fiscal 2004 earnings-per-share estimate on ITT Educational Services by $0.03 from $1.48 to $1.51. "Although ITT appears to be an "overvalued" outlier in our analysis given its relatively high P/E compared to its attribute score, we remain confident in the company's operating margin expansion initiatives, including its 2+1 hybrid program, its pure online program and new program rollout activity," said Marostica.

To receive a copy of Marostica's latest edition of the Valuation Conundrum, clients and members of the media should contact Dana Wade at or 415-277-1556.

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