K12 (NYSE: LRN) and Capella Education (NASDAQ:CPLA) are both small-cap consumer discretionary companies, but which is the superior investment? We will compare the two businesses based on the strength of their institutional ownership, analyst recommendations, profitability, valuation, risk, earnings and dividends.

Volatility & Risk

K12 has a beta of -0.2, suggesting that its share price is 120% less volatile than the S&P 500. Comparatively, Capella Education has a beta of 0.49, suggesting that its share price is 51% less volatile than the S&P 500.

Institutional and Insider Ownership

79.2% of K12 shares are held by institutional investors. Comparatively, 89.1% of Capella Education shares are held by institutional investors. 18.3% of K12 shares are held by company insiders. Comparatively, 3.6% of Capella Education shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Profitability

This table compares K12 and Capella Education’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
K12 0.05% 3.18% 2.40%
Capella Education 10.49% 20.23% 15.34%

Dividends

Capella Education pays an annual dividend of $1.64 per share and has a dividend yield of 2.4%. K12 does not pay a dividend. Capella Education pays out 42.4% of its earnings in the form of a dividend.

Valuation and Earnings

This table compares K12 and Capella Education’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
K12 $888.52 million 0.78 $87.41 million N/A N/A
Capella Education $438.59 million 1.78 $71.59 million $3.87 17.30

K12 has higher revenue and earnings than Capella Education.

Analyst Ratings

This is a breakdown of recent ratings and price targets for K12 and Capella Education, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
K12 0 0 2 0 3.00
Capella Education 0 1 2 0 2.67

K12 presently has a consensus target price of $18.50, indicating a potential upside of 8.89%. Capella Education has a consensus target price of $85.36, indicating a potential upside of 27.50%. Given Capella Education’s higher possible upside, analysts clearly believe Capella Education is more favorable than K12.

Summary

Capella Education beats K12 on 8 of the 14 factors compared between the two stocks.

K12 Company Profile

K12 Inc. (K12) is a technology-based education company. The Company offers curriculum, software systems and educational services designed to facilitate individualized learning for students in kindergarten through 12th grade (K-12). It provides a continuum of technology-based educational products and solutions to public school districts, public schools, virtual charter schools, private schools and families. The Company offers a set of products and services primarily to three lines of business, which include Managed Public School Programs, which consists of virtual and blended schools; Institutional business, which includes educational products and services sold to school districts, public schools and other educational institutions, and Private Pay Schools and Other, which includes private schools, including international, for which it charges student tuition and direct consumer sales. It sells individual online courses and supplemental educational products directly to families.

Capella Education Company Profile

Capella Education Company is an education services company. The Company provides direct path between learning and employment through its online postsecondary education offerings and through programs to develop job-ready skills for demand markets. The company’s segments include post-secondary segment and job-ready skills segment. The post-secondary segment has Capella University (the University) and Sophia Learning, LLC (Sophia). The job-ready skills segment has Capella Learning Solutions, LLC (CLS), Hackbright Academy, Inc. (Hackbright) and DevMountain, LLC (DevMountain). The Company’s program offers six markets, which include public service leadership; nursing and health sciences; social and behavioral sciences; business and technology; education and undergraduate studies. Capella University offers over 1,940 online courses and approximately 50 academic programs with approximately 150 specializations to approximately 38,000 learners.

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