'Aggressive' ITT Education Analyst Thinks Stock Can Double

ITT Educational Services, Inc. ESI received a vote of confidence from Barrington Research on Thursday.

According to the note, while the estimates for the month and year are coming in below last year's results, the analysts think that the stock has the potential to double moving forward.

Barrington calls for revenue estimates at -15.7 percent year-over-year, coming in at $205.0 million, with EBITDA of $25.4 million and a diluted EPS of $0.26 down 58.7 percent from last year's $0.63.

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Regarding the analyst estimates, Barrington stated, "It should be noted that ITT closed one campus location (it now has 140 locations in 39 states) and suspended new student enrollments at 10 campus locations (which represent 3 percent of new student enrollments), as a result of an internal operations (efficiency) review."

While management guided a full-year 2015 EBITDA between $90–110 million, the consensus calls for $86.7 million and Barrington is calling for $80.0 million.

Ratings And Justification

Barrington has an Outperform rating on ITT Educational, with a $6 price target.

"Trading at less than 1.0x the consensus 2016 EBITDA estimate, a big discount to the average of its peers (5.2x), we recommend investors buy the stock at current levels and hold the stock longer term (for investment) as business returns to normal – an eventual resumption of growth (sometime in 2016) and significant margin expansion potential (lots of leverage in the model) over time," the analysts explained.