ITT Educational Services, Inc. (NYSE:ESI) is a for-profit education provider. The company’s main service focus is on postsecondary education whereby it offers degree programs among other education services. ESI attracted scrutiny from regulators over its questionable student-lending practice. For-profit education providers have in the recent times seen heightened scrutiny by government authorities.
Top technical indicators for ESI.
Loan deal
On December 5, ITT Educational Services, Inc. (NYSE:ESI) announced a loan agreement, which is expected to strengthen its balance sheet through debt repayment. The company also expects to use the loan as collateral for credit, according to IBJ. ITT Educational Services signed a loan agreement with Cerberus Business Finance LLC. The agreement allows it to borrow $100 million. The company has several wars in the hand, and the loan agreement comes a sign of confidence in the business by lenders, which should serve as a morale boost for the investors in the beleaguered company.
In October, ITT Educational Services, Inc. (NYSE:ESI) rallied upward more than 75% after the company updated that its student enrollment declined less than was expected.
Beleaguered company
In September, a securities law firm calling itself Faruqi & Faruqi, LLP, announced investigation of ITT Educational Services, Inc. (NYSE:ESI). The firm declared investigations against the for-profit company with the possibility of bringing a class-action lawsuit against it and certain of its officers.
Although ITT Educational Services, Inc. (NYSE:ESI)’s latest loan deal reflects a company making efforts to shore up its balance sheet, the company is being attacked almost from all sides. The investigations by securities law firms over possible fiduciary duty violation and government scrutiny suggests a vulnerable business.
ITT Educational Services, Inc. (NYSE:ESI) had cash of $207 million as at the end of 3Q2014. The company is expected to have unrestricted cash of about $100 million at the end of the year, which should be enough address its liquidity concerns. However, analysts have been seen lowering their estimates on the company mainly because of higher interest expenses.
No stock promotion efforts have been cited in ITT Educational Services, Inc. (NYSE:ESI). Shares of the company have declined more than 70% so far this year.
Technical
Last October, ITT Educational Services, Inc. (NYSE:ESI) had rallied nearly 4 times from the low of $3.66 to $14.10. The next 5-6 weeks were spent in a corrective mode that ended last Friday, after retracing exactly 61.8% of the rally, the Golden Ratio.
The initial bounce is promising but technically, the bulls need the stock to trade above the Friday high of $10.47 to continue the rise towards a new swing high. A successful breakout would take the price immediately to $12 and then $14 in the coming sessions.
