Investors Betting on a Turnaround Must Be Cautious as Company's Growth Record is Still Very Weak
Apollo Group,'s sales growth continued its ongoing long term decline last quarter. Total revenue for the period was $946.77 million, 16.27% below the $1.13 billion booked by the company a year ago. Its 12-month trailing revenue, which also included last quarter's results, was $3.83 billion, 19.37% lower than the 12 months ended three years ago. As sales continue to slide the company will need to cut costs in order to protect its margins and its cash reserves. However, unless business conditions improve soon, more drastic restructuring measures may be required. In its latest report the company also said profit fell from the comparable quarter a year ago, extending its long term profit decline. We measure long term profit growth by comparing full year (12-month trailing) net income to the equivalent period three years earlier. Apollo Group, posted a Second quarter profit decrease of 40.35% to $79.95 million from $134.03 million (excluding extraordinary items) a year earlier; it also reported a 54.79% drop in profit in the 12 months ended last quarter to $275.78 million from the $610.00 million it made in the same period three years before. The company reported a significant margin contraction in its latest quarter, extending an ongoing trend; even though the pace of the decline slowed down from the two preceding periods, these results suggest problems with its business model. Its EBITDA, operating and net margins fell an average 26.31% relative to the year earlier period.
In a sign investors might have little confidence in the company's future performance, its June 26, 2013 earnings announcement failed to generate any positive momentum for the stock, despite earnings that beat the consensus estimate by 22.09%. The stock tumbled 10.84% between the day before and the day after the report. Such a negative reaction seemed to dismiss the fact that with this report it now has a record of having reported earnings over the last six quarters that have been, on average, 36.37% above the consensus estimate.