Days before Americans celebrated Independence Day last week, President George Bush signed into law a new war spending bill, unofficially dubbed the New G.I. Bill. This legislation doubles the amount of funding allocated for the education of military veterans and covers the cost of a four-year public college for all who have served at least four years since Sept. 11, 2001.

shares of American Public Education Inc. had been rising in anticipation of the signing, and then jumped in response to the news. The company is one of a handful of for-profit businesses providing online higher education to members of the military, and was widely seen as the biggest beneficiary of this spending increase.

Charles Town, W. Va.-based American Public Education’s stock closed Tuesday at $40.11 per share, up from $36.44 at the start of June, refreshing proof that it is, in fact, possible to side-step the bear market.

Although the increased spending on veteran’s education is a major bonus for American Public University’s shares, the company had already been on a rapid growth path, more than doubling its revenues in two years. Its 2007 revenues totaled $69.1 million, up from $40.1 million in 2006 and $28.2 million in 2005. Net income over that same period rose to $8.8 million in 2007, from $1.8 million in 2006 and from a loss of $11.9 million in 2005.

“Out of all the education stocks we follow, American Public University has the strongest growth prospects,” said Jeff Lee, an analyst with Signal Hill, which projects earnings will grow at a rate of 35% to 40% for the next several years.

Eight analysts who follow this company are on average forecasting net income will grow to $0.72 per share in 2008 and $1.06 per share in 2009, from $0.64 per share last year. They see revenues increasing to $104.6 million this year and $145.8 million next year, compared with $69.1 million last year.

It may sound strange to refer to a university as a company and discuss its performance in terms of dollars per share. But this for-profit model of delivering education in practical ways that cater to busy working adults — or those fighting a war on another continent — is becoming more and more popular. Perhaps you haven’t heard of Apollo Group Inc. (NasdaqGS:APOL - News), one of American Public Education’s rivals, but you probably do know of Apollo’s University of Phoenix, a for-profit university that has thousands of students attending its online courses and “learning centers” around the country.

Think of a school that answers to shareholders instead of trustees, and educates parents and professionals, and you get the idea. Like the University of Phoenix, American Public Education’s two schools, American Military University and American Public University, serve thousands of students who want a degree but can do without the dorm or the tailgate parties.

Unlike the well-known University of Phoenix, America Public Education offers degrees more directly targeted at members of the military with course subjects such as intelligence, homeland security and emergency disaster management.

Barrington Research analyst Alexander Paris said that along with the benefits from the new military spending bill, American Public University was also recently accepted into the Navy College Program Distance Learning Partnership, which should give it greater visibility at Navy bases around the world.

Moreover, Paris said that the company also serves the civilian population, and in an effort to reduce its dependence on the military market, is working to grow its non-military student population to about 50% of all registrations from the current 20%.

As a result, it has multiple trends working in its favor including the ongoing war that leaves distance learning the only feasible way for many troops to pursue an education, the so-called New G.I. Bill and the growing preference for online learning among civilians as well as military personnel.

In a recent research report, BMO Capital Markets analyst Jeff Silber described American Public University as a company that has “the best of both worlds as it enrolls students from both the armed forces … and the civilian market.”

Another telling detail, said Silber, comes from the strong mutual fund ownership in this company, which is not particularly common in stocks with market capitalizations under $1 billion.

Over the past two quarters, mutual fund ownership in American Public University has jumped to 50 funds from 30.

With such strong growth prospects and such strong support from institutional investors, buying this education stock should be a no brainer.