For Subscribers

Get the complete article now!

Six analysts and top management from twelve sector firms examine the education sector in this special 85-page Education Industry issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info465.htm.

TWST: What is the outlook for 2002? Could these stocks be regarded as something of a safe haven if the economy fails to recover on schedule?

Mr. Cappelli: Without a doubt. Primarily for most of the postsecondary companies, I think the fundamentals remain strongly in place. That means we're seeing good demand from both working adults and high school grads who want to earn more by getting a college degree versus not getting a degree. I think we have continued to see excellent pricing power this year, anywhere from 5%-7%, primarily due to the fact that state schools and private schools are raising their tuition by at least that much. I think that on a broad basis there is good demand for postsecondary career-based education, which positions companies in this space well for 2002.

TWST: Let's talk about the programs that are going to be most in demand in 2002 and 2003. Which will be most in demand?

Mr. Cappelli: I think that first and foremost, we continue to see very good demand in business, finance, and marketing, as well as broadly in the business skills area. Second, there is clearly still demand, even though it's not as strong as it was in IT. Our diligence suggests that there is still good demand in the area of networking and visual communications. We continue to get data that suggests that, from a career-based perspective, there is still good demand in the lower-level entry positions. I think culinary continues to be an area where there is solid demand as well. Of course, health care is a content area that tends to be less cyclical and posts solid growth due to strong demographic trends.

TWST: In postsecondary, what are the questions that are most frequently asked?

Mr. Cappelli: The questions that are asked in postsecondary are: how is the economy going to impact these businesses?; are they truly a-cyclical?; is the funding going to be there?; what's happening on the regulatory front?; are the management teams executing?; and how is the Internet impacting these companies? And, we certainly do our best to monitor these issues and they play a major role in our research. I think by and large, you're going to continue to see individual problems that pop up from time to time with certain companies, but in general, the industry is healthy, the fundamentals are solid, and you're going to continue to see 20% to 30% growth.

TWST: Do investors generally believe in the future of K-12 as an investment opportunity?

Mr. Cappelli: I think so. I think there hasn't been as much to invest in this area to this point, but we think that it's an attractive area. One company that I didn't bring up in K-12 is Sylvan Learning (Nasdaq:SLVN), which is worth owning.

TWST: They are slightly different, aren't they?

Mr. Cappelli: They are. Sylvan is very well-known for its Sylvan Learning Centers in the K-12 area. But what's been interesting is their ability to grow rapidly in the postsecondary space as well. So you had a company that was largely known as a K-12 company that was able to build a pretty sizable $250-million-in-revenue presence outside the US in postsecondary education, which is now a major part of this company. That in itself makes it unique to a lot of the other companies that we have in our coverage universe. While Sylvan is certainly not an easy company to analyze, we think there's real value in their postsecondary business, and they're a real leader in this area outside the US.

TWST: Is Sylvan a buy at the current price?

Mr. Cappelli: Yes. Sylvan's a buy

1) Education Industry - In an in-depth (11,600 words) Analyst Roundtable, Peter L. Martin, Senior Vice President at Jefferies & Company, Inc., Gerald R. Odening, Managing Director at J.P. Morgan H&Q and Jeffrey M. Silber, Senior Vice President at Gerard Klauer Mattison & Company, Inc. examine the outlook for the sector including enrollments in higher education, regulatory issues and share specific stock recommendations.

2) Educational Publishing & Service Companies - In an in-depth (4,700 words) Analyst Interview, Peter Appert, Managing Director at Deutsche Banc Alex. Brown, Inc., examines the outlook for the sector and shares specific stock recommendations.

3) Outlook for Education Stocks - In an in-depth (4,000 words) Analyst Interview, Greg W. Cappelli, Managing Director at Credit Suisse First Boston, examines the outlook for the sector and shares specific stock recommendations.

4) Knowledge Technologies - In an in-depth (4,700 words) Analyst Interview, George Sutton, Managing Director at RBC Capital Markets, examines the outlook for the sector and shares specific stock recommendations.

5) The TWST confidential Off-The-Record survey of management performance at eighteen sector firms asked market insiders about the ability of management teams to create shareholder value.

6) CEO interviews (average 2,500 words). Top management of twelve sector firms examine the outlook for their firm and the sector.