NEW YORK (TheStreet) -- Shares of ITT Educational Services, Inc. (ESI - Get Report) are up 21% to $11.12 today after Bank of America analysts raised the price target to $8 from $7 and reiterated an "underperform" rating.
ITT Educational Services, a provider of post-secondary degree programs in the U.S., has enough unrestricted cash to assuage any liquidity concerns, analysts said.
"ITT Educational Services shares rallied 131% over the past two trading days as investors are assigning lower going concern risk," analysts said, adding, "After incorporating $90 million for the letter of credit, this leaves approximately $100 million in unrestricted cash. This should be enough to largely mitigate liquidity concerns, in our view."
Separately, TheStreet Ratings team rates ITT EDUCATIONAL SERVICES INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate ITT EDUCATIONAL SERVICES INC (ESI) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, deteriorating net income, disappointing return on equity, weak operating cash flow and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Looking at the price performance of ESI's shares over the past 12 months, there is not much good news to report: the stock is down 82.60%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- 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 decreased by 21.9% when compared to the same quarter one year ago, dropping from -$9.47 million to -$11.55 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Diversified Consumer Services industry and the overall market, ITT EDUCATIONAL SERVICES INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $60.16 million or 30.52% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- ITT EDUCATIONAL SERVICES INC's earnings per share declined by 19.5% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ITT EDUCATIONAL SERVICES INC reported lower earnings of $0.03 versus $5.72 in the prior year. This year, the market expects an improvement in earnings ($2.91 versus $0.03).
- You can view the full analysis from the report here: ESI Ratings Report