After reading TAL Education Group’s (NYSE:TAL) most recent earnings announcement (31 May 2019), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether TAL Education Group’s performance has been impacted by industry movements. In this article I briefly touch on my key findings.
Were TAL’s earnings stronger than its past performances and the industry?
TAL’s trailing twelve-month earnings (from 31 May 2019) of US$293m has jumped 24% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 35%, indicating the rate at which TAL is growing has slowed down. To understand what’s happening, let’s take a look at what’s transpiring with margins and if the rest of the industry is experiencing the hit as well.
In terms of returns from investment, TAL Education Group has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. Furthermore, its return on assets (ROA) of 4.9% is below the US Consumer Services industry of 5.2%, indicating TAL Education Group’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for TAL Education Group’s debt level, has declined over the past 3 years from 10% to 9.5%.
What does this mean?
Though TAL Education Group’s past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as TAL Education Group gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research TAL Education Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for TAL’s future growth? Take a look at our free research report of analyst consensus for TAL’s outlook.
- Financial Health: Are TAL’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 May 2019. This may not be consistent with full year annual report figures.
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