Tellimer

New Oriental, an Education Stock One Might Want to Bet On Now

  • New Oriental is the largest and the oldest private education service provider in China
  • Strong brand and expertise in top-quality English teaching are the key advantages of the firm
  • It is a decent stock for long-term investment

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Although the firm is currently valued below its peers GSX and TAL, we believe it is exceptionally positioned in the industry. We tag it as a stock to consider launching a position in.

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New Oriental Education

Founded in 1993, New Oriental is the largest and oldest private education service provider in China. The firm's business breaks down into a few segments, the most fundamental offering after-school tutoring sessions for middle and high school students to prepare them for High School (zhongkao) or College entrance examinations (gaokao). The company provides small-scale or one-on-one class settings to better customize teaching methods for individual students.

According to the company's FY 2020, about 5.3 million students were enrolled in these classes. There are many types of test preparations, especially foreign entrance exams as follows but not limited to - SAT, SSAT, ACT, GRE, GMAT, LSAT, IELTS and TOEFL. There are also after-school tutoring courses for children and online courses. For instance, Koolearn and Donut classroom are the two main online websites operated by New Oriental. The company also operates 'interactive after-school tutoring courses' (DFUB), an online tutoring website, in lower-tier cities. These segments generate the most of the company's revenue.

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The firm is also the first Chinese education stock to get listed in the US in 2006. It started off at a mere USD 6 per share. As of February 22, 2021, it stands at about USD 193 per share with a market capitalization of USD 33 billion. Since 2010, New Oriental's revenue has reached USD 3.5 billion, an increase of almost 10 times. The company has remained profitable with a positive cash flow throughout this period. While the company is still solidly profitable with continued growth, cost management is a risk factor for investors to consider before purchasing its stock. 

New Oriental decided to return to China with a secondary listing on the Hong Kong stock market in October 2020...

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