A Fresh Look at TAL Education Group (NYSE:TAL) Valuation Following Strong Earnings and Profit Growth

TAL Education Group (TAL) just released its second quarter and half-year results, showing substantial gains in both sales and net income compared to last year. The stronger numbers are catching the attention of investors this week.

See our latest analysis for TAL Education Group.

After a robust earnings beat and the conclusion of its $134.7 million share buyback, TAL Education Group’s share price has surged, boasting a 16.7% share price return over the past month alone. Momentum has been building throughout 2024, with a 19.7% year-to-date share price return adding to an impressive 146.6% total shareholder return over three years. However, long-term holders still recall the tough five-year stretch. Recent results seem to have reignited optimism and set a higher bar for market expectations.

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With shares rocketing higher and growth numbers topping expectations, the question now is whether TAL Education Group still offers untapped value for new investors or if the recent rally already reflects its future prospects.

Most Popular Narrative: 15.9% Undervalued

TAL Education Group’s widely-followed fair value estimate has climbed above the latest closing price, indicating that analyst consensus expects more upside. As shares trade at $11.74 versus a fair value of $13.96, focus has shifted to what could drive the gap to close.

Diversification into online enrichment, STEAM, and AI-driven learning devices, combined with disciplined expansion of offline centers, lessens regulatory risk concentration and creates multiple growth engines. This underpins more resilient and broad-based revenue streams.

Read the complete narrative.

Want to know why TAL’s fair value got a boost? The narrative relies on a future where margins, growth, and innovation all play a bigger role. Find out which forward-looking numbers set this price target apart and could shift market expectations.

Result: Fair Value of $13.96 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, slowing K-12 growth and ongoing losses in learning devices could dampen long-term momentum if profitability in these segments does not improve.

Find out about the key risks to this TAL Education Group narrative.

Another View: The Market’s Multiple

While analyst forecasts suggest TAL Education Group’s shares are undervalued, a closer look at its price-to-earnings ratio tells a different story. The company trades at 41.7 times earnings, which is not only higher than the industry average of 15.9x but also well above its fair ratio of 29.1x. This gap signals that optimism is already priced in and raises the stakes for investors. Will rapid growth justify the premium, or could sentiment reverse?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own TAL Education Group Narrative

If you want a different perspective or enjoy diving into the numbers yourself, you can craft your own TAL story in just minutes, so why not Do it your way

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding TAL Education Group.

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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.

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