Over the past four decades, the American economy has transformed from its prior focus on manufacturing to a new focus on services. In this new world, a degree from a four-year college has become almost mandatory even for entry-level sales and marketing jobs. But for people who had to work immediately after graduating from high school, obtaining such a degree has been tough. That’s where specialized degrees from for-profit schools come in. And Strayer Education (STRA) has become a leader in the field, offering education to 55,000 students on a part-time basis and making a lot of money in the process.

It’s one of my model’s top picks for this month; let me explain why.

Acceptance rates into colleges and universities are declining rapidly. Only 7.2% of applicants are accepted to top schools like Harvard University, while even state-funded school the University of Michigan accept less than half of applicants. Strayer and its peers, like University of Phoenix, fill in the gap for working adults who were either turned away by four-year schools or were not able to apply as youths. They earn bachelor’s or master’s degrees in subjects like criminal justice, accounting, education, information systems, and the like.

Strayer stock has risen 90% over the last three years, while the S&P 500 is down -30%. Now that’s a counter-cyclical!

STRA provides students with both physical campuses and online classes. It is opening 10 new campuses a year, mostly in the southeast, that average 1,000 students each. STRA has been able to boost enrollment annually by 18% over the past five years and 21% in the past quarter.

STRA has been successful not just because of its successful marketing but because its low-cost model has permitted much higher margins than traditional colleges and universities. Morningstar analyst Tom Young reports that the combination of government-financed financial aid with this low-cost structure has allowed STRA to keep up-front entry prices low for students, and thus help keep cash-flow rates steady.

The higher-education industry is generally counter-cyclical, as enrollment grows during a weak economy. STRA competitors like Apollo Group (APOL) and DeVry (DV) specialize in diploma and certificate programs that follow this mold. However, Strayer provides undergraduate and graduate courses are less affected by economic cycles. The average student isn’t a starry eyed 20-year-old — it is a 31 year-old professional trying to jump-start her career. Many employers even pay for Strayer’s programs. By focusing on this older demographic, Strayer has been able to increase revenues by 20% annually in both strong and weak economic conditions.

Despite being an eighth the size of the Apollo and one third the size of DeVry, Strayer’s $550 million in sales results in a much healthier profit margin of 20.6%. (APOL and DV margins are both under 14%). And only 3% of Strayer’s revenue is derived from student loans, leaving the company significantly less exposed to credit risk than rivals. More importantly, Strayer has demonstrated an incredible ability to generate value for shareholders, logging a terrific return on equity of 64%.

Chief executive Robert Silberman has aggressively grown the company without overextending. Morningstar points out that Strayer could easily add more students by lowering its admissions criteria, but management realizes that letting lower quality students in would lower the school’s reputation and classroom quality.

Board members incentives are clearly aligned with shareholder interests as 50% of compensation comes in the form of restricted stock. The company also has no debt and pays a small dividend.

Over the past three years, Strayer’s has bucked negative trends in the economy and risen 90% while the S&P 500 has lost 20%, as shown in the chart above. Yet every growth stock comes with risks. Any reduction in government or employer-sponsored financial aid could significantly reduce earnings. A decrease in the perceived quality of online education is also a danger.

However, Strayer’s growth prospects should lead to impressive shareholder returns. It only operates physical locations in 18 states and is well positioned to expand to the 32 other states. Going forward, my valuation model projects 18% revenue growth over the next four years and operating margins remaining constant at 34%. Strayer has been afforded a 30 p/e multiple in the past and using my earnings estimate of $12.23, we’re looking at an 18-month price target of $365, about 45% higher.

For more ideas, check out my Trader’s Advantage and Strategic Advantage newsletters.