About the company
Universal Technical Institute is a provider of postsecondary education that offers specialized technical education programs for students interested in careers as professional automotive, diesel, collision repair, motorcycle and marine technicians.
The company was founded in 1965 by Bob Sweet who left the aerospace industry because he wanted to be in the business for himself. He bought a franchise from Lincoln Technical Institute and started the school with two classrooms. In the early 1970s, he quit the franchise and renamed his school Universal Technical Institute.
The company possesses several strengths such as a strong brand name and deep relationships with various manufacturers.
Students of Universal Technical Institute often must relocate in order to attend the school, and as a result, must find part-time jobs to support themselves. In this economy, it is hard to get part-time jobs, making this a less feasible option for students. Another weakness is the company’s high tuition. Students can get similar training at community colleges at a lower cost.
Over the last several years, the company didn’t grow as fast as other for-profit education companies. Even though revenues increased, net income declined significantly because expenses grew faster than revenues.
The company operates in the for-profit education industry but focuses on technical education. The demand for automotive technicians is likely to stay high in the future as our automobiles are becoming more complex and half of mechanics in the U.S. is going to retire within the next 10 years.
The entire for-profit education industry is not popular with investors because of regulatory concerns. Any regulatory changes are risky because for-profit education companies rely on Title IV loans to generate revenues. Any changes in Title IV programs could be detrimental to the entire industry.
I like this company very much because of its strong brand name and the fact that it provides education services that are needed. At the right price, I would buy the stock.
Disclosure: The Author does not own UTI.