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What is DeVry’s business worth?

Stock is down almost 10%. The fundamentals of this company hasn't changed, other than it's suddenly out of style.

Given the company’s successful growth in the medical/healthcare and professional/training segments, and the furor surrounding the student lending industry, this provides a baseline on which a low/high end valuation can be formed.

In order to conduct the cash flow analysis for the next 10 years, I set the discount rate at %11.75 to determine the value of all future cash flows for DeVry. I feel that this rate is justified given some of the risks surrounding the lending industry in the near term, even in light of DeVry’s assertions that they will not be materially affected.

For the best case scenario, revenue growth rates is set at 20% for the next 5 years, trailing off to 5% for each year thereafter. This assumes DeVry optimizes it operations through continued real-estate sales and targeted capital expenditures and investments to realize continued growth in their medical/healthcare and professional/training segments. This results in a high end valuation of $61/share.

For the low end valuation, revenue growth is set to 10% for the next 5 years, trailing off to 5% for each year thereafter. This is a slightly more conservative assumption, but still represents healthy growth over the next 5 years given the job trends in the medical and financial service industries. This results in a valuation of $44/share.

DeVry looks to be one of the few for-profit educational stocks that will be able to weather the student lending problems, and its strategic moves over the past year have helped grow their business. Government action to inject liquidity is definitely promising, but still has some risks as the program is not off the ground yet. Long term prospects look promising going forward... just waiting for a good entry point.

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