Why ITT Education Shares Were All Over the Place

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in g they're material to our investing thesis.

What: Shares of ITT Educational Services (NYSE: ESI  ) are putting investors through the spin cycle today, first falling as much 18% on a bad earnings report before charging up all the way to an 11% gain later in the session.

So what: Earnings were way off estimates, as the for-profit educator put up a $0.41-per-share loss instead of the $1.80-per-share profit analysts had projected. Revenues also declined 18%, new student enrollment was down 11%, and EPS guidance came in below estimates at $3.50-$4.00 for 2013.

Now what: This sector has taken a hit across the board as the Obama administration has cracked down on the for-profit education model, which is heavily reliant on student borrowing, so today's revenue drop is not that surprising. If ITT's guidance is to be believed, then the financials seem to be bottoming out, as the decline in new students was less than the overall decline in enrollments. The company is projecting flat new student enrollment growth next year.

If those projections hold, this stock looks incredibly cheap, trading at P/E near 4 based on 2013 earnings, which seems to explain the late-morning run-up in the stock. Reform is needed in this industry, but I don't think it will disappear completely, so shares could bounce back as these schools stabilize.

Don't miss the next update on ITT. Add the stock to your Watchlist by clicking here.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2214288, ~/Articles/ArticleHandler.aspx, 2/27/2015 9:02:07 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Apple's next smart device (warning, it may shock you

Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!