Corinthian Colleges Inc.'s stock rose 22% in its first day of trading Friday, following an initial public offering that raised $48.6 million.
The company's stock closed Friday at $22 in Nasdaq trading, up $4. At one point during trading, the stock hit $25, a 38.9% jump. More than 2.8 million shares traded.
The Santa Ana-based company is one of the nation's largest operators of for-profit career-oriented colleges. It's also the newest public member of a group of education-related stocks that have caught the eyes of investors, including Illinois-based Devry Inc., ITT Educational Services in Indiana and Apollo Group, which is based in Phoenix and owns the University of Phoenix.
"Over the last two years, investor interest has really exploded," said Scott L. Soffen, an analyst with Legg Mason Wood Walker, an investment firm in Baltimore.
The future is bright for these companies because more people are attending career-oriented colleges that offer the practical knowledge students need to land jobs in what has become an "information-based economy," Soffen said.
Computers have upped the ante, making a formal education increasingly important.
"That is really why investors are excited about the career colleges," Soffen said. "Generally, the career colleges are much better at preparing their students for jobs."
These companies also are Wall Street favorites because they follow a traditional business model that generally yields a profit of about 15%, said Howard Block, an analyst with BancBoston Robertson Stephens.
"It's a very predictable business," he said. "When students enroll at the beginning of the academic year, investors can establish with a certain level of comfort how much revenue will be generated throughout the entire year."
These companies also feature aggressive marketing and recruiting, which lure students from community colleges, analysts say.
Newcomers to the college market, such as Corinthian, are especially attractive to investors because their shares are less expensive than the established businesses, Block said.
Corinthian was founded in 1995 by five former executives of National Education Corp. It bought 16 colleges from NEC. In 1996 Corinthian purchased 18 campuses from Phillips Colleges Inc. in Gulfport, Miss.