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Posted on:Oct 292008

Should You Own Stock in a Training Company?

By Doug Harward

In today’s economy, does it make sense to own stock in a publicly traded training company? It depends on your investment goals. But it may be an interesting investment to consider. Let’s compare five training companies and how they have performed in the last 5 years to the S&P 500 index. You may know that the S&P 500 is viewed as an optimally diversified portfolio so it gives a good, but not perfect perspective of market performance. The period of performance evaluated is from 1/6/03 to 10/27/08. I chose this period because it takes us from the tail end of the .com crash to current day activity.   

 

Companies I studied are General Physics (GP), SkillSoft, Saba, New Oriental Education, and Learning Tree. All are completely focused on learning services and technologies. Each has a different strategy related to products and services for their customers. But all are well branded and respected companies in the global training market. Please note that I did not include any of the companies who provide learning services as a secondary part of their business model. Examples of these are Accenture, IBM, and Raytheon. Also not included are companies listed on foreign exchanges (e.g. India, London). Companies you might consider here are NIIT, and Aptech. Here are the findings from each of the 5 companies reviewed. .

 
  • General Physics (NYSE:GPX) – training outsourcing company; last traded for $5.30 the week of Jan 6, 2003. On Oct. 27, 2008, last traded for $7.28. Increase of 37.36% over the period.
  • SkillSoft (Nasdaq:SKIL) – e-learning and performance support solutions; last traded for $3.14 the week of Jan. 6, 2003. On Oct. 27, 2008, last traded for $7.17. Increase of 128.34% over the period.
  • Learning Tree (Nasdaq:LTRE) – training delivery services for technical and managerial training; last traded for $13.27 on Jan. 6, 2003. On Oct. 27, 2008, last traded for $10.58. Decrease of 20.27% over the period.
  • Saba (Nasdaq:SABA) – enterprise learning content management software; last traded for $.99 on Jan. 6, 2003. On Oct. 27, 2008, last traded for $1.70. Increase of 71.7% over the period.
  • New Oriental Education (NYSE:EDU) – English language training in China; last traded on Sept. 16, 2006 at $26.40. On Oct. 27, 2008, last traded for $45.84. Increase of 74% over the period (note that New Oriental Education was evaluated over a shorter period because they completed an IPO in 2006).
 

Now let’s look at the S&P 500 Index over the same period of time. I found that the S&P has dropped from 927.57 on Jan. 6, 2003 to 848.92 on Oct. 27, 2008. This represents a drop of 8.48%. Initial data shows that four of the five companies outperformed the market. Below is chart showing the trend of these 5 stocks against the S&P 500.

  Stock Index

Source: Yahoo Finance 

 

If you are interested in following the education and training industry index and comparing it to the S&P index, take a look at Education and Training Industry Index.

 

With all that said, what do you think? Are training companies a good investment over the long haul?

Posted in: Industry News

About the Author

Doug Harward

Doug Harward is the CEO and Founder of Training Industry, Inc. Mr. Harward is internationally recognized as one of the leading strategists for training and outsourcing business models. He is respected as one of the industry's leading authorities on competitive analysis for training services and works with international companies and new business start-ups in building training organizations.

Mr. Harward previously served as the Director of Global Learning for Nortel Networks where he led the industry's largest global training outsourcing engagement with PricewaterhouseCoopers. He received the Chairman's Global Award for Community Service for his work in developing integrated learning organization strategies within higher education, public schools and business. He has worked in the training industry for more than 25 years. Mr. Harward received an MBA from the Fuqua School of Business at Duke University and a BSBA in Marketing from Appalachian State University.

6 Comments

Media doesn't speak much about our industry segment as it is either not large enough, or not popular enough because it isn't core business for many companies. But from your analysis, it looks like we are an industry to be taken seriously by investors.

Dhimant PatelJune 22 2009 (2:56 PM)

Maybe we should ask Jim Cramer from TheStreet.com what he thinks about our industry. Haven't heard him mention it before. If it's not on Cramer's watch list, what does that mean for us?

Jerry RasmussenJune 22 2009 (3:09 PM)

There is another index for the training industry published by Dow Jones. The name of the index is the Dow Jones US Business Training Index and the code is ^DJUSBE. You can find the index at http://finance.yahoo.com/q/ta?s=%5EDJUSBE. This index only shows 5 days of data. Anyone know why? And not sure who the companies are in the index. My guess is it is comprised of for-profit online colleges. Can anyone help with who the companies are?

Jim SpellJune 22 2009 (3:09 PM)

Dhimant has a good point on not being large or popular enough to attract a lot of investors. The industry is so fragmented and no company has a measurable market share that causes investors to look elswhere.

Don DuquetteJune 22 2009 (3:10 PM)

Neale, The training industry in China is an immensely challenging market for training providers. Many training companies have steered away from China because of the huge risk associated with the loss of intellectual property. But other companies have been very successful there. For example, companies from India such as NIIT, Aptech, and others are very succesful in delivering training in China as they have established a strong footprint. Others like GP, Raytheon, and RWD have followed customers into the country which allowed them to create a successful business there. On another note, a couple of years ago I met with the Consulate in Shenzhen and asked what the biggest needs for training were in China. He named four areas of training in this order of priority; 1. English as a Second Language; 2. Manufacturing; 3. IT; and 4. Business Acumen. The message was they are very interested in getting the training that helps them to communicate better, perform better in the core markets they want to compete in (manuf and IT), and to be able to speak the language of the global business community. I think the biggest limiting factor for China to bring in better training is the lack of control over IP rights. This will continue to keep many good companies out that provide online training.

Doug HarwardJune 22 2009 (3:11 PM)

Being a neighbouring country of China, i can say that in Pakistan and China training is the name of a practical example, showing the workforce how to do it?, inspite of training the workforce on some set of instructions & research and then giving them the practical knowledge. A simple way is to design lower level training certification programmes at nominal prices, (just to keep the interest of the learner intact), like one we do here at ASK Development for Call Center agents as how to behave while answering the calls and how to facilitate the customers in the best possible manner. Or like ORCA did for filler boys at gas filling stations. They provide training with certification on safety and filling procedures along with the customer care techniques. Likewise, there are lot more low level jobs running and still generating then the higher level technical jobs. It is my request to the both governments to urge institutions like these and support those who are already working for the cause.

Sohaib SaleemJune 22 2009 (3:11 PM)

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