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.

Trade-Ideas LLC identified ITT Educational Services ( ESI) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified ITT Educational Services as such a stock due to the following factors:

  • ESI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $2.6 million.
  • ESI has traded 71,241 shares today.
  • ESI is trading at 5.14 times the normal volume for the stock at this time of day.
  • ESI is trading at a new low 5.37% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize (or avoid losses by trimming weak positions). In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on ESI:

ITT Educational Services, Inc. provides postsecondary degree programs in the United States. Currently there are 2 analysts that rate ITT Educational Services a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for ITT Educational Services has been 366,400 shares per day over the past 30 days. ITT Educational Services has a market cap of $181.3 million and is part of the services sector and diversified services industry. The stock has a beta of 2.56 and a short float of 54.6% with 26.85 days to cover. Shares are down 20.6% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates ITT Educational Services as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • 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 98.0% when compared to the same quarter one year ago, falling from $20.20 million to $0.39 million.
  • The debt-to-equity ratio is very high at 2.01 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, ESI has a quick ratio of 0.66, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • 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.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 76.46%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 97.67% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • ITT EDUCATIONAL SERVICES INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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 swung to a loss, reporting -$1.16 versus $5.69 in the prior year. This year, the market expects an improvement in earnings ($1.22 versus -$1.16).

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