Investors believe US educational suppliers mostly immune to cutbacks
Murmurs that the so-called U.S. education bubble is close to bursting are seeping through the markets as for-profit education stocks see volatility in their share prices. But what of those companies supplying education institutions with their equipment and classroom resources? With the Obama government highlighting that education requires reform coupled with cutbacks in public spending, we look at investor sentiment towards; Pearson Plc (LON:PSON), Promethean World Plc (LON:PRW), Smart Technologies Inc (NASDAQ:SMT) and School Specialty Inc (NASDAQ:SCHS).
Pearson’s U.S. education business is thriving following its acquisition of Schoolnet. Last year, the UK media company saw its U.S. education business account for almost 40% of its total turnover. The business seems to tie in neatly with Pearson’s innovative strategy to offer more interactive learning and utilizing new technology, such as smart tablets. Short interest has been holding steady at a low of 1% of total shares outstanding on loan, so far this year. However, this figure has recently doubled as we see dividend trading activity. Institutional owners are also showing growing positive sentiment towards the stock as lendable quantity, which can be used as a proxy for institutional ownership, has increased by almost 10% this year.
Promethean World Plc is another UK company with a high revenue dependency on U.S. education. The interactive whiteboard maker has been dogged by missed expectations and declining revenues since its flotation in April last year. Severe cuts to U.S education budgets have resulted in a decrease in school spending resulting in a negative impact on the company. However, only 0.4% of the total shares outstanding are currently out on loan. Institutional ownership of large funds who lend has decreased by 17% this year.
Smart Technologies, a Canadian based competitor of Promethean World, is currently subject to growing bearish investor sentiment. The stock which also floated last year has seen short interest increase from 9% to 13% of total shares outstanding on loan over this year so far. In contrast, institutional ownership has almost doubled and represents 10% of the company.
School Specialty Inc has seen its share price tumble close to annual lows. While short interest has doubled to almost 12% of total shares outstanding on loan since October. Institutional ownership remains relatively flat over this time period which has resulted a quarter of the lendable supply currently out on loan.
