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ITT Educational Services Inc. Message Board

  • oxledge oxledge May 9, 2012 9:27 AM Flag

    Interesting review of ESI financial stats

    I thought that I would review ESI financial stats since 2008. Periodic review always is useful, particularly in light of the ever expanding short interest as a percentage of the float. The stats are quite stunning.

    In 2008...

    Share out = 40 mill
    Stock price = $90-$130
    Market cap = $3.4 - $5 billion
    Revenues = $1 billion
    Net Income = $203 million
    EPS = $5.17/share
    Free Cash Flow (NI + Deprec - Cap Exp) = $188 mill
    Cash on balance sheet = $379 million (7.5% - 10% of market cap)

    So where are we now ...2011 stats..

    Share out = 23 mil (as of 4/27/12)
    Stock price = $60
    Market cap = $1.4
    Revenues = $1.5 billion
    Net Income = $308 million in 2011
    EPS = $11.13/share (2011) and probably $10.00/share for 2012
    Free Cash Flow (NI + Deprec - Cap Exp) = $307 mill
    Cash on balance sheet = $375 million (26.7% of market cap)

    So here is the review....

    Revenues up 50%, Net income up 52%, Free Cash flow up 63%, EPS up 115%, shares outstanding down 42.5%, Cash on balance sheet unchanged, stock price down 33%.

    One way to look at this is that ESI's business has grown 50% in the past 3-4 years and the company has taken all the free cash flow other than what was required for maintenance and expansion capital expenditures and given it back to shareholders though massive stock repurchases. ESI still has the same businesses as they did in 2008 (actually they have more). In 2008 those business could be purchased for $3.4-$5 billion. Now in 2012, these same businesses which are generating significantly more in revenues, net income, and free cash flow can by purchased for $1.4 billion (that is 870% less than the average market cap in 2008. And the company's balance sheet is the same...with $375 million in cash.

    If I were to buy all of ESI today, I would pay $1.4 billion, I would strip out the $375 million in cash, for a net outlay of $1.025 bill. I would then collect on the order of $240 million in earnings and free cash flow. P/E ratio is 4!

    The short sellers have already seen a massive decline in the market cap of ESI, form $3.4 billion/$5 billion in 2008 to $1.4 billion now. But unfortunately they did not collect on their wager properly. A huge portion of the decline in ESI's market cap was realized through stock buybacks, which was of no benefit to the short sellers. Now the short sellers are trapped with a massive 9.8 million short interest in a share count base that is falling very very rapidly.

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    • Nice spin, but they still watched the price per share get cut in half. The government rightly has for profits schools under their microscope so there is probably more pain in the future for the stockholders.

      • 1 Reply to wpamntnman
      • This is not spin at all. It is all fact. I clearly point out that the ESI share price has declined from $90-$130 in 2008 to the current $60. I also point out that the p/e, adjusted for cash is 4, and so on and so forth. If there is something that I posted that is incorrect. let me know.

        Regarding"spin", I would say that you comment "The government rightly has for profits schools under their microscope so there is probably more pain in the future for the stockholders" is alot of spin. I agree that the government has the industry under the microscope, but this news is so old and worn out. You "spin" is the claim that "there is probably more pain in the future for the stockholders". That is 100% unsubstantiated spin. It may prove correct, but regardless, what you wrote is what I would call "spin".

 
ESI
2.62+0.16(+6.50%)Feb 12 4:02 PMEST