Company Description: China Education Alliance (CEUA), Inc. is a leading educational service company offering high-quality online education materials and on-site training and tutoring to families, provincial education officials, administrators, schools and teachers in China . The Company distributes online test preparation materials, researchers' materials, study guides, audio recordings, and provide vocational skills and certification training.
(Data Ended 6/18/2009)
- Price = $2.90
- Trailing EPS = $0.46
- Fully-Taxed Trailing EPS = $0.31
- EPS Estimate = $0.62
- Fully-Taxed EPS Estimate = $0.43
- P/E based on Fully-Taxed Trailing EPS = 9.35
Reasons for Optimism
- CEUA meets 10 out of 10 GeoBargain® Requirements a
Requirement Comments YES Recent 52-week High (generally within 3 months) $3.40 on 6/1/2009 YES 30% EPS Growth Rate
- Full year 2008 vs 2007 EPS growth rate of 33%
- Forecast 2009 EPS growth rare of 54%
YES 10% Revenue Growth
- 1st Qtr. 2009 vs 2008 revenue increased 102%.
- Full year 2008 vs 2007 revenue growth rate of 43%
YES Strong Balance Sheet As of 1st Qtr 2009 Positive Cash Flow
- $3.9 Million as of 1st Qtr. 2009
- $9.8 million for 2008
Debt to Equity Ratio less than 20% 0% Current Ratio is at least 2:1 15:1 YES Return on Equity is at least 15% 19.3% trailing, 20.5% for 2008 YES Minimum Pre-tax Operating Margins of 8% 41.4% as of 1st Qtr. 2009, 42.6% for 2008 YES Preferably Under 50 Million Shares 24.4 million shares as of Qtr. 2009 YES High Insider Ownership (generally greater than 15%) 57.7% as of March 23, 2009 YES Limited Institutional Ownership (generally less than 20%) <20% YES P/E Divided by EPS Growth Rate (PEG Ratio) is Less Than 1. 0.18
- Over the last ten years, there has been increased awareness of the value of educating the youth of China. (Source Wikipedia). Initiatives to help students receive higher education and respected degrees has prompted a nationwide expansion of tools geared towards the edification of an increasing number of individuals. Although the Chinese government has always considered education an important component of its economic and social development, the recent emergence of its market economy has made schooling a top priority in order to maintain a healthy growth of available learning resources. CEUA provides services and products that meet the market demand for learning material that stresses the importance of doing well in standardized tests, a vehicle which the government has adopted as a predominant measure for evaluating students at different levels of the learning process. (Source 2008 10K)
- China Education Alliance is expanding into vocational training and education, adding another element of growth to its business. As China continues to focus on attaining its modernization goals, there will be an increasing number of people entering into vocational programs geared towards imparting technical skills to its students. In 2007, China had 14,832 secondary vocational and technical institutions. About 19.9 million students were studying in secondary and post-secondary vocational institutions. (Source Wikipedia)
Additionally, with the increased importance of becoming multi-lingual, CEUA has taken the appropriate steps to expand its business to offer English language programs through its recently acquired subsidiary, World Exchange Inc.
- The Company uses a model of "vertical integration" that potentially guides students to use China Education Alliance resources throughout different stages of the learning process. This gives the Company the potential to receive a consistent long-term revenue stream.
- The Company is becoming more proactive in disseminating information about its story. It recently hired a qualified Investor Relations firm, a move that the GeoTeam has always maintained to be a required step to increase shareholder value. In fact, they just participated in the Red Chip Companies 2009 Small-cap Investor Conference Live Webcast event on June 16, 2009.
Potential Valuation Scenarios if the Company can achieve its EPS growth goals
Short-Term Potential value based on fully taxed adjusted trailing EPS
- P/E 20 * $0.31 = $6.20
- P/E 25 * $0.31 = $7.75
Short-term Potential value based on 2009 fully taxed adjusted Estimates or Guidance
- P/E 15 * $0.60 = $9.00
a CEUA is not paying a full U.S. tax rate. Therefore, all EPS numbers have been adjusted by the GeoTeam to reflect a U.S. tax rate of 36%. Figures also exclude non-cash and non-operating items. Ratios and growth rates reflect these adjustments.
These scenarios are not intended to be investment advice, but are scenarios based on some commonly used investment guidelines. They are provided to aid investors in making their own investment decisions.
Disclosure: Long CEUA.