Investors in New Oriental Education & Technology Group Inc. (NYSE:EDU) had a good week, as its shares rose 4.6% to close at US$120 following the release of its quarterly results. New Oriental Education & Technology Group reported US$1.1b in revenue, roughly in line with analyst forecasts, although earnings per share (EPS) of US$1.31 beat expectations, being 6.5% higher than what analysts expected. This is an important time for investors, as they can track a company’s performance in its report, look at what top analysts are forecasting for next year, and see whether the latest forecasts would suggest a change of heart on the company. Readers will be glad to know we’ve aggregated the latest forecasts to see whether analysts have changed their mind on New Oriental Education & Technology Group after the latest results.
Following the latest results, New Oriental Education & Technology Group’s 26 analysts are now forecasting revenues of US$3.9b in 2020. This would be a notable 19% improvement in sales compared to the last 12 months. Earnings per share are expected to bounce 45% to US$2.97. Before this earnings report, analysts had been forecasting revenues of US$4.0b and earnings per share (EPS) of US$2.80 in 2020. Analysts seem to have become more bullish on the business, judging by their new earnings per share estimates.
The consensus price target rose 7.2% to US$133, suggesting that higher earnings estimates flow through to the stock’s valuation as well. There’s another way to think about price targets though, and that’s to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values New Oriental Education & Technology Group at US$150 per share, while the most bearish prices it at US$120. The narrow spread of estimates could suggest that the business’ future is relatively easy to value, or that analysts have a clear view on its prospects.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. We can infer from the latest estimates that analysts are expecting a continuation of New Oriental Education & Technology Group’s historical trends, as next year’s forecast 19% revenue growth is roughly in line with 22% annual revenue growth over the past five years. Juxtapose this against our data, which suggests that other companies (with analyst coverage) in the are forecast to see their revenues grow 18% per year. So although New Oriental Education & Technology Group is expected to maintain its revenue growth rate, it’s only growing at about the rate of the wider market.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards New Oriental Education & Technology Group following these results. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for New Oriental Education & Technology Group going out to 2022, and you can see them free on our platform here..
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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