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...
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