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ITT Educational Services Inc. Message Board

  • aaatiles aaatiles Mar 19, 2008 1:46 PM Flag

    To Investors - A Summary


    If you want to read through all 1800+ posts from the beginning, feel free. What you will find in the MAJORITY of the posts is negative sentiment from current and former students/current and former instructors/current and former administrators/outside investors is of students getting screwed, poor quality of students and grading, ridiculously simple entrance exams, high cost of education [if you want to call it that], low quality of an education, all while watching the stock price go from $30 to $120, back down to $50.

    About the only positive posts among the heap are one from a former student who graduated in 2000 (and even he says the current price/credit hour is steep), some administrators masquerading in their posts to keep the stock pumped up so their inordinate amount of stock options stay above the watermark and don't go into the tank, and a few day traders who look for pops one way up or down in the stock to get suckers to buy or sell and emphasize the trader's positions.

    When the over-arching sentiment is so negative, is it possible that all of the negative posts are not legitimate? Perhaps, but not plausible. Honestly, who has time to post such a plethora of gripes if they weren't in fact partially or wholly true?

    The market cap on this stock is currently $2.05 billion at $51/share. AMBAC and MBIA, the two financial guarantors that had the ENTIRE financial markets in a tizzy just last month, each barely have market caps over $2 billion, and they insured several TRILLIONS of dollars of municipal debt and complex financially-structured securities. Can ESI, an organization that somehow found 53,000 suckers (I mean, nice students who are for the most part getting shafted but just don't know it yet], be worth as much as ABK and MBI even with their potentially toxic securities? I highly doubt it.

    Folks, this one is doomed. Mark the words before you wake up one day and ESI is at $2 per share like BSC. Of course, no one thinks any company will go down, but they do. And some should.

    P.S. I am not a day trader, former anything with this organization, just a simple guy who hates to see people getting taken advantage of (especially students who aren't yet worldly-wise), HATES to see corporate accounting scandals (since I've worked sorting out a few) [not implying that this is happening at ESI since I have no knowledge of that and only have access to public documents on (EDGAR reports)], and hates to see investors lose money senselessly. Again, do your own homework and decide for yourself.

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    • investors, please read

    • any comments, critiques, clarifications, updates?

    • The $2 per share was an analogy. It was analogous to waking up one day, and the price has cratered and wondering how that happened. The $2 per share was simply mentioned because of the recent BSC drop, not because ESI has anything whatsover to do with BSC, but to illustrate that point. And that point is, I am saying, I believe the price will go down and the stock, to me, is not worth $50/share, not worth even $20 a share. If it gets down to a range of $5 - $10, so be it. I'm not going to make a price-point exact prediction for a specific point in time because that is ridiculous. Either you agree with the analysis, in part or in whole, or you disagree and can share your reasons for all to critique and be open to debate. Does that answer your question, once and for all?

    • are_you_ready_skidaddy are_you_ready_skidaddy Mar 24, 2008 10:11 AM Flag

      So for like the FIFTH time, do you believe that ESI is going to $2 a share?

    • any other comments, critiques, clarifications?

      Jamesnjamesn, can you add that info on the split between 2-year students and 4-year students and their average starting salaries, since you seem to have that inside information somehow? Thanks, most appreciated.

    • Continued from Part 1

      The company has already pledged $158 million of collateral (probably the land and the building but it didn't clarify) for the $150 million outstanding debt.

      If you had money to lend, even at 12% to students with no collateral and a more-than-average chance of default than the general population, would you lend money? I most certainly wouldn't. Even AMBAC got 14%. At $455/credit hour AND potentially sky-high interest rates to students, can you explain to me how it is possible that revenue will continue to increase in light of the SLM discontinuation?

      ESI is already the highest leveraged for-profit education company at 2.13 debt-to-equity. I think the next closest one is at 0.6. There is not much wiggle room for this company to the upside, considering the aforementioned information.

      If management can't find a replacement lender soon for 29% of its revenue stream, they will have to revise earnings down, probably in May. If 2008 and 2009 forecasts then drop to $2/share, the stock MIGHT be worth 13X forward PE or 26. And the market will move it there, if that happens. Then when the market really digs in and takes notice of the leverage and treasury stock at book of $43/share when the actual price moves to $26, it will most likely plummet from there as everyone realizes no one will lend ESI any more money and its capital position is seized up. And the other for-profit companies will idly stand by and let it die and maybe somebody like DeVry will come in at a low-ball price of $5/share to pick up the scraps. DeVry wouldn't need the burden of all of the locations, just some of the instructors since DeVry already has its own locations. I only mention DeVry because of their technical background not because anything is in the works with ESI.

      It is not entirely implausible that such events could happen. Is that enough for you for now? Tell me, can I see your research and analysis or do you even have any?

    • ESI purchased the following shares back on the open market:
      2008 so far: 810,000 shares ave. $84.51 for $68.45 mil
      2007: 2,659,000 shares ave. $99.66 for $265.0 mil
      2006: 5,607,000 shares ave. $64.74 for $363.0 mil
      2005: 929,000 shares ave. $59.85 for $55.6 mil

      total 2005-2008 bought: 10,005,000 shares for $751.972 million, ave. of $75.16/share.

      current treasury stock balance at 2/15/08 should be 15,185,000 shares ave. $43.03 for $653,346,000 total.

      Current share price today is about $50.50.

      Does that sound like a good use of internal cash to you? Even worse, management stated in its 10-K that it used $150 million of its loan proceeds (only has another $10 million of room on the credit facility, then tapped out) to purchase these treasury shares. So, now management is paying interest on the loan AND is upside down on the value of the stock for the purchase period of 2005, 2006, 2007 and 2008!

      If the stock price drops below $43.03 per share and ESI decides to sell some of those shares on the open market, there will be a recognizable loss that will transfer from the treasury stock account to the retained earnings account, further exacerbating the strain on their already low book value of $71 million at 12/31/07. I believe the Company is required to use the LIFO method when calculating the gain/loss on the sale of treasury stock. This means, they will have to use the 2008 stock first, or the ones purchased at $84.51 per share first, then into the 2007 shares at $99.66/share and so on.

      Therefore, ESI will recognize a loss on the first 10 million shares it re-sells. If that loss eats past the $71 million in equity, guess what? Equity starts heading to zero and below. What's that called? Bankrupt.

      I would surmise that the reason the CFO is going to the Bank of America Small-Midcap Conference in Boston next Wed. for an investor presentation is to try and drum up lenders to fund the 29% of revenue that might vanish now that Fannie Mae cut off its lending to ESI effective 2/28/08. I haven't heard that management has already found any lenders. I think they were putting it before Bank of America, Chase and one other bank. I don't think Bank of America or Chase or anyone else wants to lend money to sub-prime students who offer no collateral. If no one steps up to that plate, ESI might have to announce in April that their revenue will be off 30% for 2008 and the foreseeable future. Staff cuts come next. Revenue drops off 30%, but earnings drop off 50% due to the lag in eliminating overhead and the high overhead itself. So, $4 EPS goes to $2.

      Continued on Part 2

    • I'm offering no forcast. I'm seeking clairification from newbie poster on the $2 price share on ESI he forcasts.

    • Are-You-Ready for what? Where is you review that this company is going anywhere? All you do is discount what others say. You're a pumper and that's all. I don't know if this stock is doomed, but I'd say put your money elsewhere. This guy pulled the info of the sec site, where are you basing your facts from buddy?

    • Right now I'm critiquing your posts
      WHERE IS THE POST ON CECO? I assume they are a different set of readers over there and might benefit from your opinion. You never know.
      You know how to tell bashers? There's always a tell. They try so hard and be fair and square and even offer up analysis but They CAN'T help putting that dig in. That "Folks, this one is doomed. Mark the words before you wake up one day and ESI is at $2 per share like BSC."
      That absurd statement that gives them away.
      So in conclusion:
      "Folks, this one is doomed. Mark the words before you wake up one day and ESI is at $2 per share like BSC."
      That statement is not an analogy, that is a forcast of where you think ESI is going.
      For like the fourth time. Do you really believe that ESI drops to $2 like BSC did?

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