Do New Oriental Education & Technology Group's (NYSE:EDU) Earnings Warrant Your Attention?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like New Oriental Education & Technology Group (NYSE:EDU). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide New Oriental Education & Technology Group with the means to add long-term value to shareholders.

Check out our latest analysis for New Oriental Education & Technology Group

How Quickly Is New Oriental Education & Technology Group Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that New Oriental Education & Technology Group has managed to grow EPS by 22% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. EBIT margins for New Oriental Education & Technology Group remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 39% to US$4.6b. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for New Oriental Education & Technology Group's future EPS 100% free.

Are New Oriental Education & Technology Group Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$10b company like New Oriental Education & Technology Group. But we are reassured by the fact they have invested in the company. We note that their impressive stake in the company is worth US$1.2b. That equates to 12% of the company, making insiders powerful and aligned with other shareholders. Looking very optimistic for investors.

Should You Add New Oriental Education & Technology Group To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into New Oriental Education & Technology Group's strong EPS growth. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in New Oriental Education & Technology Group's continuing strength. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. Of course, just because New Oriental Education & Technology Group is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Although New Oriental Education & Technology Group certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.