Lincoln Educational Services Strong Technical, Back to School Theme

In Monday’s Goldman Guide we pointed out a couple of factors we are looking at right now. First, a high RSI, which is typically and overbought signal here, but we are using as a momentum indicator. Secondly, it is not too early to think about back to school as far as the market goes.

Lincoln Educational Services Corporation (NASDAQ – LINC - $1.69) is a relatively cheap stock with a current RSI over 60, an overbought signal. Also, as illustrated below, the LINC is now trading over the 25-day EMA.

LINC 6-Month Chart, 25 Day EMA

(Source: www.otcmarkets.com)

Lincoln Educational Services Corporation, together with its subsidiaries, provides various career-oriented post-secondary education services in the United States. It offers bachelor's degree, associate's degree, and diploma and certificate programs in automotive technology, skilled trades, healthcare services, hospitality services, and business and information technology areas to recent high school graduates and working adults. The Company operates 31 schools in 15 states under the Lincoln Technical Institute, Lincoln College of Technology, Lincoln College of New England, Lincoln Culinary Institute, and Euphoria Institute of Beauty Arts and Sciences brand names.

The first metric that jumps out is the technical indicator, short float. Lincoln is under 1%. Additionally, the forward P/E is 8.5 on consensus analysts’ revenue growth estimates of 29% in 2016 and 300% in 2017! Finally, positive EPS surprises can be critical to ‘pops’ especially in the small cap world. The Company has averaged plus 171% in that regard over the last three quarters.

We like the technical analysis for LINC combined with the back to school theme. Wall Street analysts appear to love the stock as well given the revenue estimates over the next two years. For these reasons we think the stock climbs to $3 by the end of the year.

Have a great day!

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