EDU: Expanding Margins Will Drive High Visibility Earnings Compounding Ahead

Analysts have modestly lifted their price targets on New Oriental Education & Technology Group, with increases ranging from about $2 to $8 per share, citing accelerating revenue growth, expanding margins, and resilient earnings visibility despite pockets of structural weakness in overseas study programs.

Analyst Commentary

Street research remains broadly constructive on New Oriental Education & Technology Group, with most recent target price revisions modestly upward and accompanied by reinforcing commentary on growth durability, margin trajectory, and earnings visibility.

Bullish Takeaways

• Bullish analysts highlight accelerating fiscal Q1 revenue growth as evidence that New Oriental is transitioning from post-regulation recovery to a more sustainable growth phase, supporting higher valuation multiples.
• Expanded margins are viewed as a key driver of earnings compounding, with cost discipline and mix optimization underpinning rising non-GAAP EPS estimates into FY26 and FY27.
• Resilient domestic kindergarten through high school operations and less severe than feared overseas revenue declines bolster confidence in the company’s ability to offset structural headwinds and maintain a robust earnings base.
• JPMorgan’s raised target and commentary that New Oriental is “back to compounding earnings with high visibility” reinforce the view that execution risk is moderating and that the stock retains upside as visibility improves.

Bearish Takeaways

• Bearish analysts remain concerned about structural declines in the overseas study business, which could cap long term growth potential and justify more conservative valuation assumptions despite near term outperformance elsewhere.
• While domestic segments are offsetting overseas weakness, the reliance on a narrower set of growth engines increases concentration risk and could pressure the multiple if momentum in core K 12 slows.
• Incremental target price cuts, even when paired with Buy ratings, reflect lingering execution risk around portfolio transition and the pace at which high margin, scalable offerings can fully replace legacy revenue streams.
• Rising expectations embedded in higher EPS estimates raise the bar for future quarters, leaving less room for operational missteps or macro driven demand softness without prompting renewed downward revisions.

What's in the News

• Issued Q2 FY2026 guidance calling for total net revenues of USD 1,132.1 million to USD 1,163.3 million, implying 9% to 12% year over year growth (company guidance).
• Reaffirmed FY2026 full year revenue outlook of USD 5,145.3 million to USD 5,390.3 million, targeting 5% to 10% year over year growth (company guidance).
• The Board of Directors authorized a new share repurchase plan on October 28, 2025, enabling the company to buy back its own shares (board resolution).
• Announced a USD 300 million share repurchase program, to be executed over 12 months and funded from existing cash (company announcement).
• Reported that between March 1 and April 30, 2025, it repurchased 2,157,320 shares for USD 97.87 million, completing a total of 15,111,753 shares bought back for USD 741.77 million under the July 27, 2022 program (buyback update).

Valuation Changes

• Fair Value Estimate: unchanged at $64.49 per share, indicating no revision to the intrinsic value assessment.
• Discount Rate: risen slightly from 7.77% to 7.80%, reflecting a marginally higher required return on equity.
• Revenue Growth: edged down slightly from 9.65% to 9.63%, suggesting a modestly softer medium term growth outlook.
• Net Profit Margin: increased slightly from 9.72% to 9.75%, pointing to a small improvement in expected profitability.
• Future P/E: eased marginally from 18.44x to 18.40x, implying a slightly lower valuation multiple on forward earnings.