Editor's Note: This article is part of Inc.'s weekly report on business niches in partnership with financial information company Sageworks.
The private education industry is getting its books in order.
After a substantial slump between 2007 and 2012, educational services companies have seen their average net profit margin almost double since 2012.
The industry primarily includes schools, universities and training centers, and includes both for-profit and non-profit entities, as defined by financial information company Sageworks. The education industry's average net profit margin rose to 9 percent during the 12 months ending September 2, up from 4.8 percent in the same period two years ago, according to Sageworks. In the past year alone, the industry's net profit margin has increased by almost 3 percent, bringing it to the highest rate in over 10 years.
“Tuition and fees have been rising at a faster pace than the inflation rate, which may contribute to higher net profit margins, given the relatively stable level of expenditures for these institutions,” says Sageworks analyst James Noe.
Mirroring net profit margin, the rate of sales growth for educational services has increased by almost 2 percent since September 2012.
“Measuring the financial performance of educational services can be tricky, given that many organizations operate as nonprofits or with goals outside of financial return,” says Sageworks analyst Libby Bierman.
“The recent data release suggests a positive, directional trend. If educational services can operate with increasing revenue and with lean operations, that gives the facilities more money they can reinvest into the education services or expand operations to meet increasing demand from the population.”