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More Legal Woes, ITT Educational Services (ESI) at 52-Week Low

April 08, 2013 | About:
Sally Jones

Sally Jones

49 followers
The GuruFocus 52-week low screener reveals that ITT Educational Services Inc. (ESI) is at a 52-week low of $12.01 (the high was $74.55). According to the GuruFocus Value Screen for 52-week lows, ESI is 83.9% off its high. But top Gurus Columbia Wanger and Westport Asset Management are holding on to small chunks, and ESI insider trading has been slow this quarter.



With the news of an U.S. Securities and Exchange Commission (SEC) investigation, ITT Educational Services' stock has been steadily declining, and is down 81% for 12 months, off 32% since January. With a market cap of $280.4 million, a P/E ratio of 2.1 and a P/B ratio of 2.3, the educational company and provider of post-secondary degree programs, is feeling the pinch of ongoing legal woes and investigations. As of last week ITT Educational Services announced that it is being investigated by the SEC for the company's accounting associated with a private education loan program from 2009 and a risk sharing agreement. The SEC also announced that it was investigating the company's accounting of certain loan guarantee agreements made through its PEAKS Private Student Loan Program.

ITT has further problems. In December 2012, it agreed to pay Sallie Mae Inc. $46 million to settle another lawsuit. ITT will incur an after-tax charge to net income of approximately $13.2 million, or a reduction of $0.56 to fourth quarter per-share earnings, according to the company.

For 2012 revenue, ITT Educational Services reported an increase of 7% to $2.2 billion with organic revenue up 8%, and GAAP earnings totaling $1.16 per share; adjusted earnings are $1.68 per share. The company lists cash from operating activities for a total of $247 million; adjusted free cash flow conversion was 172%. The company outlook for 2013 includes an expected 10% total revenue growth. ITT’s guidance also shows 10% growth in adjusted earnings per share at the mid-point of 2013 guidance, a 10% dividend increase to $0.10 per share, and up to $75 million of additional share repurchases.

The company offers seven schools of study: the School of Information Technology, School of Electronics Technology, School of Drafting and Design, School of Business, School of Criminal Justice, School of Health Sciences and Breckinridge School of Nursing. ITT Technical Institute has 140 locations nationwide in over 35 states, with over 70,000 students.

As of Sept. 30, 2012, ESI’s largest Guru stakeholder Columbia Wanger increased its position by 31.94% and holds 826,175 shares.

Columbia Wanger’s holding and price history:



Westport Asset Management is the second largest Guru stakeholder of ESI with 290,098 shares, after a reduction of 30.95% as of quarter ending March 31, 2012.



Check out the GuruFocus special feature 52-week low screener. This special feature helps you find the stocks hitting new lows but are still held by top investor Gurus and Insiders. If billionaire Gurus own these stocks and are still increasing their positions, it means that they believe the stocks are undervalued. Researching these stocks may help you find deep valued stocks.

About the author:

Sally Jones
Sally Jones writes about Real Time Picks. She says, "I truly enjoy watching the Gurus in realtime and telling their story."

Rating: 3.8/5 (5 votes)

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