New Oriental is Making Profits in China’s Education Market

Stock (Symbol)

New Oriental Education (EDU)

Stock Price

$183

Sector

Data is as of

Expected to Report

Company Description

Sharek’s Take

New Oriental Educations is China’s largest private education provider with an online network of approximately 17 million students. In fiscal year-ending May 31, 2020 the company had a physical network of 104 schools and 1361 learning centers in 91 cities and approximately 41,400 teachers. The company had higher number of customer service representatives and marketing staff to capture opportunities during the COVID-19 period. And it appears this strategy was successful.Product offerings are divided into seven areas:

• K-12 After School Tutoring — courses for middle and high school students to help get students compete to get into top schools. EDU’s “Pop Kids” program teaches English, math, Chinese, writing, music and arts for kids in kindergarten and elementary schools. As of last fiscal year (May 31, 2020) the company had 4,444,000 enrollments in its after-school tutoring courses for children. K-12 achieved revenue growth of 8% last qtr, and was the key growth driver for the company. Student enrollments for K-12 after school tutoring increased 21%.
• Test Preparation — courses to students taking entrance exams used by schools in China and the US including SAT, ACT, GRE and GMAT. Last year, EDU has 502,000 student enrollments in its test prep courses.
• Language Training Courses for Adults — English training as well as foreign languages. Many employers in China require a high level of English proficiency with employees. The company had 40,000 students enrolled in this area at the end of the last fiscal year.
• Primary and Secondary School — EDU has a private and secondary school in Yangzhou with a full curriculum taught in Chinese and English, with an emphasis on English language training. There were 3400 students enrolled in the Yangzhou school as of May 31, 2020.
• Educational Content — EDU develops books, software, CD-ROMs, magazines and other periodicals. Last fiscal year (ending May 31, 2020) the company developed 260 titles and distributed 17 million books in China.
• Online Education — Koolearn is the leading online education service provider in China. Programs are listed on www.koolearn.com and www.koo.cn with free and paid content.
• Other Services — New Oriental consultants help students with applications for overseas educational institutions. It also organizes study tours for students to go overseas.

New Oriental New Oriental is one of the fastest growing companies in the world. But its a hard stock to handle. I’ve bought and sold it in the past, only to buy it back at a higher price. The stock currently has an Estimated Long-Term Growth Rate of 33%. But the P/E of 59 is high by historical standards. EDU is part of the Growth Portfolio. Let’s see if the 65% upside potential in three years is worth waiting for.

One Year Chart

The Est. LTG of 33% a year is excellent.

Earnings Table

Annual Profit Estimates took a big dip this qtr. I don’t like the inconsistency in these numbers.

Qtrly Estimates are for -23%, 150%, 41% and 12% profit growth the next 4 qtrs. These figures also fell this qtr.

Fair Value

Bottom Line

New Oriental Education (EDU) has been a stock I’ve tracked/owned for around a decade now. Although the yearly stock growth has been good, the stock has been hard to handle. 

With EDU at its highs again, I wish to sell the stock. I don’t like the up-and-down moves of annual profit estimates. The stock seems like it could be this price a year from now.

EDU will be sold from the Growth Portfolio.

Power Rankings

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Aggressive Growth Portfolio

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Conservative Stock Portfolio

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