NEW YORK ( TheStreet) -- New Oriental Education & Technology Group I (NYSE: EDU) has been upgraded by TheStreet Ratings from hold to buy. 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, impressive record of earnings per share growth, compelling growth in net income and expanding profit margins. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 12.5%. Since the same quarter one year prior, revenues rose by 38.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving 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 2.40, which demonstrates the ability of the company to cover short-term liquidity needs.
- NEW ORIENTAL ED & TECH reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, NEW ORIENTAL ED & TECH increased its bottom line by earning $0.66 versus $0.50 in the prior year. This year, the market expects an improvement in earnings ($0.89 versus $0.66).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Consumer Services industry. The net income increased by 80.5% when compared to the same quarter one year prior, rising from $1.84 million to $3.31 million.
- The gross profit margin for NEW ORIENTAL ED & TECH is rather high; currently it is at 53.70%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 2.50% trails the industry average.
-- Written by a member of TheStreet RatingsStaff