Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. NEW YORK ( TheStreet) -- ITT Educational Services (NYSE: ESI) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and a generally disappointing performance in the stock itself.
- EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.
- The debt-to-equity ratio is somewhat low, currently at 0.67, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.26, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has significantly increased by 119.86% to $7.61 million when compared to the same quarter last year. In addition, ITT EDUCATIONAL SERVICES INC has also vastly surpassed the industry average cash flow growth rate of 53.88%.
- The revenue fell significantly faster than the industry average of 20.3%. Since the same quarter one year prior, revenues fell by 21.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- ITT EDUCATIONAL SERVICES INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, ITT EDUCATIONAL SERVICES INC reported lower earnings of $5.76 versus $11.11 in the prior year. For the next year, the market is expecting a contraction of 33.1% in earnings ($3.85 versus $5.76).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Diversified Consumer Services industry. The net income has significantly decreased by 54.6% when compared to the same quarter one year ago, falling from $46.00 million to $20.86 million.