ITT Educational Services Inc (NYSE:ESI)
ITT Educational Services is having an overwhelmingly hard time in the market as of late, and for good reason. However, after the dramatic declines that we've seen on the stock, a question is starting to emerge. Just how low can this stock go? Today, we'll talk about why the company is having such a hard time, what we're seeing from the stock today, and whether or not ESI will survive the storm.
Here's Why ESI Has Taken Such A Dramatic Dive!
As mentioned above, there's a good reason that ITT Educational Services has taken such a dramatic dive. At the end of the day, the company that made its money by manipulating students to sign up for an education that inherently came with low graduation rates and even lower job placement rates was found out!
On Friday of last week, the United States Department of Education decided that it would no longer allow funding of ESI-based student loans with federal funds. The reason provided - educations provided by the company didn't offer a competitive edge in the job market and too many students were defaulting on their student loans as a result.
To break that down, the Department of Education essentially said that not only is ESI failing students, but it is a drain on the economy as a result. Because the Department has a fiduciary duty to both, and the company was failing both, it simply can't fund new loans for the school anymore. In a statement surrounding the news, the Secretary of Education, John King, had the following to offer:
“Our responsibility is first and foremost to protect students and taxpayers. Looking at all of the risk factors, it's clear that we need increased financial protection and that it simply would not be responsible or in the best interest of students to allow ITT to continue enrolling new students who rely on federal student aid funds.”
What We're Seeing From The Stock Today
At the end of the day, the news that broke Friday was a massive blow to the company. As a result, we've been seeing big declines since. Today, those declines continue as more investors decide that it's time to abandon the hypothetical sinking ship that is ITT Educational Services. Currently (1:13), the stock is trading at $0.40 per share after a loss of $0.04 per share (9.42%) thus far today.
Can The Company Survive This Hit?
While I don't like to be the bearer of bad news, it's important that I offer my honest opinion when I write. With that said, not only do I believe that ESI doesn't have what it takes to survive the hit, I also believe that the company doesn't deserve to survive. Think about it... For several years now, the company has made its money by making students believe that the education provided was their way to gain an upper hand in the market. But that education proved to be so poor that it came with incredibly low graduation rates. These students took out loans to cover this education thinking, “I'm going to get out of school and be successful in an amazing career!” The students that put in incredible effort to graduate did so, only to find that the job market wasn't a place that accepted them. In many places, an ITT Educational Services education gave graduates about as much of an upper hand as a high school diploma.
With that said, moving forward, I'm expecting ESI sales to drop off tremendously. Students that rely on student aid will obviously not be going to the school. On top of that, self-funded students are likely to avoid the school like a plague. My friends, I believe that we're seeing the beginning of the end of this company!