Stock (Symbol) |
New Oriental Education (EDU) |
Stock Price |
$78 |
Sector |
| Food & Necessites |
Data is as of |
| August 1, 2017 |
Expected to Report |
| Oct 23 |
Company Description |
 New Oriental Education & Technology Group Inc. is a provider of private educational services in China. EDU operates through 7 segments, which include language training and test preparation, primary and secondary school education, online education, content development and distribution, pre-school education, overseas study consulting services and study tour. Source: Thomson Financial |
Sharek’s Take |
 New Oriental Education (EDU) is China’s largest private education provider teaching almost 5 million students with 22,000 teachers in more than 850 learning centers in 65 cities, in addition to an online network of approximately 17 million students. I’ve tracked EDU for around a decade. I’ve always liked the stock but there were always issues holding me back — primarily the pressure on US private schools by the US government, which hurt the sector overall. The company had revenue climb an astounding 30% a year from 2007 to 2017 with record sales each year. It’s grown profits 23% a year during the last decade and qtrly Estimates look even better. Check this out, here’s profit Estimates for the next 12 qtrs: 18%, 157%, 42%, 39%, 24%, 59%, 30%, 33%, 31%, 44%, 44%, 36%. So after next qtr it could be clear sailing through 2019 (if these figures don’t decline). With a P/E of 33 this stock is rich, but with profits growing fast I don’t consider it overvalued at all. I will add EDU to the Growth Portfolio today. Chinese growth stocks are hot right now — momentum is strong — and with the market trending down these stocks are the place to be at the moment. |
One Year Chart |
 Last qr New Oriental had sales growth of 23% but enrollment growth of 37%. Profits soared 64% and beat estimates of 52% but comparisons were easy. EDU has an Est. LTG of 31% which is one of the highest in my universe, and the P/E of 33 is reasonable considering the growth rate. 2017,2018 and 2019 annual profit estimates are $2.40, $3.20 and $4.19, which is are very good. |
Fair Value |
 My Fair Value is a P/E of 35, which makes the stock fairly valued here (today EDU is $85, these charts and tables were done on 8/1 when the stock was $78). Upside to 2018 is excellent, and gives the stock very good potential. |
Bottom Line |
 New Oriental has been on a run lately, but had some catching up to do after many years of going nowhere. With Chinese growth stocks hot right now I think this stock can continue higher as the Chinese names have some catching up to do. EDU will be added to the Growth Portfolio today and will rank 20th of 34 stocks in that portfolio’s Power Rankings. The stock is too extended to put in the more concentrated Aggressive Growth Portfolio. |
Power Rankings |
Growth Stock Portfolio
20 of 34Aggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
