Why ITT Educational Might Be a Smart Selection

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of ITT Educational Services  jumped more than 5% this morning after Wells Fargo upgraded the for-profit educator from market perform to outperform.

So what: Along with the upgrade, analyst Trace Urdan boosted his valuation range to $39-$42 (from $25-$30), suggesting that the shares trade roughly at a 25% discount to their intrinsic value. While value investors might be turned off by the stock's hot run in 2013, Urdan believes that there's room to run given ITT's strong enrollment momentum.

Now what: Wells Fargo boosted its 2013 EPS view from $3.54 to $3.72 and its 2014 estimate from $2.79 to $3.02. "We are upgrading the shares of ESI to Outperform from Market Perform based on what we believe has been continued success in new student enrollment resulting from the company's Opportunity Scholarship," Wells Fargo noted. "Our valuation range rises to $39-42 from $25-30 on the basis of stronger CY2014 EBITDA expectations and a firming multiple." Of course, with ITT shares already up 180% from its 52-week lows and trading at a market-matching price-to-cash flow ratio, I'd wait for a wider margin of safety before jumping in.

More reliable ways to build wealth
Dividend stocks can make you rich. It's as simple as that. While they don't garner the notoriety of high-flying growth stocks, they're also less likely to crash and burn. And over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.

The article Why ITT Educational Might Be a Smart Selection originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story