NEW YORK (TheStreet) -- New Oriental Education & Technology (EDU) - Get New Oriental Education & Technology Group, Inc. Sponsored ADR Report was falling 3.3% to $22.68 Monday after missing analysts' estimates for revenue in the fiscal third quarter.
In its fiscal third quarter New Oriental posted earnings of 30 cents a share, beatings analysts' estimates of 23 cents a share by 3 cents. Revenue grew 16.4% to $254.4 million in the quarter. Analysts surveyed by Thomson Reuters expected revenue of $267.2 million for the quarter.
"Although the program transition currently underway in our POP Kids offering impacted growth in this segment during the quarter, we are encouraged that our overseas study business and middle and high school U-Can business continued to perform well," New Oriental president and CFO Louis T. Hsieh said in a press release. "Our overseas test preparation and overseas study consulting businesses together recorded year-over-year gross revenue growth of approximately 22.2% in the quarter, to approximately US$92.8 million, while our U-Can grade 7 to 12 all-subjects after-school tutoring business recorded year-over-year gross revenue growth of about 21.0% to approximately US$77.6 million."
TheStreet Ratings team rates NEW ORIENTAL ED & TECH as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate NEW ORIENTAL ED & TECH (EDU) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, solid stock price performance and impressive record of earnings per share growth. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 0.5%. Since the same quarter one year prior, revenues rose by 25.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- EDU has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, EDU has a quick ratio of 2.11, which demonstrates the ability of the company to cover short-term liquidity needs.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Diversified Consumer Services industry and the overall market, NEW ORIENTAL ED & TECH's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- Powered by its strong earnings growth of 130.00% and other important driving factors, this stock has surged by 41.54% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, EDU should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- NEW ORIENTAL ED & TECH reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, NEW ORIENTAL ED & TECH's EPS of $0.87 remained unchanged from the prior years' EPS of $0.87. This year, the market expects an improvement in earnings ($1.33 versus $0.87).
- You can view the full analysis from the report here: EDU Ratings Report
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.