How to spot a brittle business

Can a business selling dud products make a good investment? Yes, but only for a while. Eventually, the dope wakes and the share price tumbles.

One sector has done a better job of destroying shareholder value than any other over the past few years. Welcome to vocational education and training (VET), a world where governments hand over billions of dollars to questionable businesses delivering sub-standard education to students who are ill-equipped financially – and sometimes physically and mentally – to complete overpriced courses they were sold but didn’t want.

This was a business model that generated high rates of profit growth without triggering any underlying concerns. ‘How good is Australian Careers Network (ACN)?,’ asked one broker at a company presentation, ‘it’s growing like crazy!’.

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