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New Oriental Education & Technology Group: Long-Term Buy But Wait For Price Action To Gain Momentum

Gordon MacLean profile picture
Gordon MacLean


  • Thriving alongside a growing Chinese economy.
  • No real fundamental risks.
  • Very sound financial statements.
  • Shares testing key technical support.

The business

New Oriental Education & Technology Group, Inc (NYSE:EDU) is a provider of private educational services in China. The company offers a range of educational programs, services and products consisting of English and other foreign language training as well as prep courses for tests such as the SAT and ACT. EDU shows continuous growth in the key metrics and despite shares being down 10% YTD, after returning 120% in 2017, the company is ready for another leg higher.


As I just stated, 2017 was a great year for EDU as share prices rose 120%. This rise in price was justified as the company has performed well in all the key metrics. The company's fiscal year ends May 31 and for their 2017 fiscal year, they saw revenue increase 21.72% over the prior year's 18.57%. This trickled down to the bottom line where EPS grew a whopping 32.62% over the 16.53% in 2016. EBITDA also increased 30.31% YoY along with net income rising 32.98% in that same period.

(Source: Thomson Reuters Eikon)

The company shows consistent YoY growth in all of the key metrics. The only metric that the company did not see YoY growth in, is their gross profit margin which declined 0.10%. Despite this number, the company still has an impressive gross margin of 58.34%. So a small decline should not impact the company much, if at all.

(Source: Thomson Reuters Eikon)

This performance is expected to continue going forward as estimates for 2018 contain a YoY revenue increase of 32.9%, EBITDA growth of 10.98%, net income is expected to rise 17.84% and EPS estimates are $2.20 per share which would be a 17.72% increase from 2017.

Strength and weaknesses

China's economy continues to grow and according to the company's most recent 20-F filing, "The overall economic

This article was written by

Gordon MacLean profile picture
My principal strategy involves conducting technical analysis to search for and identify key patterns which reveal opportunities for me to capitalize on short-term price action of an asset. Once a pattern is identified, a rigorous analysis of the company's financial health and overall business allows me to identify company's that qualify for an addition to my value portfolio as a longer-term holding, beyond my initial short-term horizon based off of the technical analysis done in phase 1 of my research.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (1)

D. McDevitt profile picture
Just found this company. Now I'm looking for a downside while scrounging together some capital.
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