[Video] Is For-Profit Education Profitable? ITT Tech Valuation


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by Dan Myers

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There is a lot of controversy on whether or not the profit motive should play a role in the education of society.

Those against it claim that corporations will just churn students through and not care whether or not they actually learn.

The pro side claims that if the corporations do not create value for the students, long term profits would decline and thus there is a motivation to provide the best education possible.

As that battle rages on, for profit education companies have taken a beating in the market.  Those on the negative side seem to have the upper hand today.

The question now becomes:  Is this the “blood on the streets” time to buy into these companies or is this the next buggy whip industry?

Introducing ITT Educational Services (ESI)

ITT Educational Services, commonly known as ITT Tech, provides post high school education in various fields.

Their programs range from Information Technology, Electronics, Drafting & Design, Business and Nursing.

ITT Tech has been around since the 1940’s so they have a well-established brand and business model.

What’s Explained in the Video

  • ITT Tech’s business model
  • Review of their financials
  • Why a high debt ratio is different from debt to free cash flow
  • Why there is a drop off in revenue recently
  • Valuing a business based upon only the parts we think are viable
  • The risks inherent in the education industry
  • Identifying businesses as Graham value investments vs. Buffett value investments

Enjoy the Discussion on ITT Tech

Part 1 | Part 2 | Part 3

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5 responses to “[Video] Is For-Profit Education Profitable? ITT Tech Valuation”

  1. DTEJD1997 says:

    Dan:

    I don’t think there is a big controversy about “education” companies being able to earn a profit. Heck, the “non-profit” schools earn TREMENDOUS profits too…

    The controversy is that they provide absolutely NO VALUE and that a large percentage of them are committing active fraud. For example, signing up people without computers or computer skills for online classes. Recruiting students from homeless shelters. Graduates in health care programs receiving absolutely worthless certificates/degrees that don’t allow them to work in hospitals or the health care industry. Having 25,000 students and ONE career counselor. Telling prospective students that they will make $35/hr. when the graduate, reality is that they make $9/hr. IF THEY CAN FIND A JOB.

    So I think the problem is that the industry is committing fraud or questionable acts and students get no value. Not so much that they make a profit.

    Heck, I hope they make BILLIONS of dollars. They just have to have students that benefit and they have to do it in an honest manner.

  2. Frank Tudor says:

    I think it was $14 when you wrote this. It is $17 today. Nice retracement. Nice timing on your post. I think it has more to go but it might be slower past this very fast move. Keep up the good work.

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