From the G'zoo's biz sexion:
On Aug. 13, two guards suffered minor injuries quelling a disturbance at a private Texas prison. The prison operator, Corrections Corp. of America, saw its stock price slide 10 percent that week. But analysts say such “headline shock” is becoming less severe, and profit growth is expected to climb next year.
“Disturbances are part of the prison business, public or private,” says analyst T.C. Robillard of Banc of America Securities, who has a “buy” on Corrections Corp. There’s still a business imbalance that these companies take advantage of, he says —too many inmates, not enough cells. Many analysts predict strong growth in 2008 and 2009, despite already-high price-earnings ratios. The margins for private prison operators are thin, and profits could be modest the rest of this year before new contracts and cost adjustments take hold. But two of the three main players are positioned well for strong growth, analysts say. Corrections Corp. is the largest private prison operator in the United States, while GEO Group has branched out into criminal mental health facilities and illegal immigrant detention.
“We would rather put our money in CXW and GEO at this point in time,” says Lehman Brothers analyst Jeff Kessler. He’d avoid Cornell due to inconsistent earnings and problems that led to the closure of a Texas facility in 2005.
GEO, alert readers will recall, is the company that operated the private women's prison up in Brush, the one which hired guards without bothering to do criminal background checks, where several inmates complained of sexual abuse by said guards. State of Colorado then had to take over, more proof that private prisons really do save the state money!
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