– According to GF value
The holdings of the New Oriental Education & Technology Group (NYSE: EDU, 30 year financial data) is assessed as clearly undervalued according to the GuruFocus Value calculation. GuruFocus Value is GuruFocus’ estimate of the fair value at which the stock should trade. It is calculated based on the historical multiples at which the stock was trading, past business growth and analyst estimates of future business development. If a stock is well above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is well below the GF Value Line, its future return will likely be higher. At a current price of $ 9.22 per share and a market capitalization of $ 15 billion, New Oriental Education & Technology Group shares show all signs of significant undervaluation. The GF value for the New Oriental Education & Technology Group is shown in the table below.
With New Oriental Education & Technology Group significantly undervalued, the long-term return on its stock is likely to be much higher than its business growth, which averaged 25.3% over the past three years and is projected to grow 22.85% annually over the next few years will grow three to five years.
Companies with little financial strength present investors with a high risk of permanent capital loss. To avoid permanent loss of capital, an investor must do their research and verify a company’s financial strength before making a decision to buy stocks. Both a company’s cash-to-debt ratio and interest coverage are great ways to understand its financial strength. New Oriental Education & Technology Group has a cash-to-debt ratio of 3.01, which is better than 68% of companies in the education industry. The total financial strength of the New Oriental Education & Technology Group is 5 out of 10, which suggests that the financial strength of the New Oriental Education & Technology Group is reasonable. These are the New Oriental Education & Technology Group’s debts and money over the past several years:
Companies that have been consistently profitable over the long term offer less risk to investors who may want to buy stocks. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. The New Oriental Education & Technology Group has been profitable 10 over the past 10 years. For the past twelve months, the company had sales of $ 3.9 billion and earnings of $ 0.24 per share. The operating margin is 5.95%, which is in the middle of the range for companies in the education industry. Overall, the New Oriental Education & Technology Group’s profitability ranks 9th out of 10, which suggests strong profitability. These are the revenues and net revenues of the New Oriental Education & Technology Group in recent years:
Growth is probably the most important factor in evaluating a company. GuruFocus research has shown that growth is closely related to the long-term performance of a company’s stock. The faster a company grows, the more likely it is to create value for shareholders, especially if the growth is profitable. The average annual sales growth rate over 3 years of the New Oriental Education & Technology Group is 25.3%, better than 84% of companies in the education industry. The 3-year average EBITDA growth rate is 18.2%, which is in the middle of the range for companies in the education industry.
Another way to determine a company’s profitability is to compare the return on invested capital to the weighted average cost of capital. The return on investment (ROIC) measures how well a company generates cash flow in relation to the capital invested in its business. The weighted average cost of capital (WACC) is the average interest rate a company pays to all of its securityholders to fund its assets. When the ROIC is higher than the WACC, it means the company is creating value for shareholders. For the past 12 months, the New Oriental Education & Technology Group has a return on investment of 2.97 and a cost of capital is 7.58. The historical comparison between ROIC and WACC from the New Oriental Education & Technology Group is shown below:
In conclusion, I would like to say that the inventory of the New Oriental Education & Technology Group (NYSE: EDU, 30-year financials) everything indicates that it is significantly undervalued. The company’s financial condition is fair and its profitability is strong. Its growth is in the mid-range of companies in the education sector. To learn more about New Oriental Education & Technology Group stocks, check out 30 year financials here.
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This article first appeared on GuruFocus.