Jonathan Rossman
Hedge fund manager, long/short equity, event-driven, special situations

Long ITT Educational Services: Misunderstood With Short-Term Catalyst

For reasons that I will explain below, I believe that ITT Educational Services, Inc. (NYSE:ESI) is a good short-term long opportunity as the very high short-interest (38% of the float) is likely to come down meaningfully and quickly. The stock is currently trading at a single-digit multiple of 2014 cash flow (including stock comp); yet, starts are improving, and as revenues increase we should see significant operating leverage. In the "Bear Case" section, I argue against each of the bear case points, highlighting that the short thesis appears stale, and that this will become even clearer in the next few quarters. Using a DCF (with conservative assumptions and results detailed in the last paragraph below) I am estimating...

Join Seeking Alpha PRO to read this archived article and 11,574 other archived articles
IDEA GENERATORXExclusive access to 10 PRO ideas every day
INVESTING IDEAS LIBRARYXExclusive access to PRO library of more than 15,000 ideas
SECTOR EXPERT NETWORKXExclusive access to all sector experts for direct consultation
PERFORMANCE TRACKINGXTrack performance of all PRO stock ideas
PROFESSIONAL TOOLSXProfessional Idea Filters to zero-in based on industry, market cap and more
"In just the first month of using PRO, I used it to generate two ideas which were actionable for me. As a result of these two positions, I have earned more than 20 times the annual subscription costs for PRO."Michael Yagemann, Greenbridge Capital
"I am pleasantly surprised with the scope of small and mid-cap coverage PRO offers. You can't find that any where else."Patrick Rice, Mainstay Capital Management
You may cancel at any time for any reason, and receive a prompt refund for membership on months paid and not used (max. 6 months). Details