New Oriental Education and Technology ( EDU: NYSE)
Chinese stocks have been some of the world's top performers over the past year. But they have cooled off considerably over the last few weeks. Some of them were overvalued anyway and deserve a breather. But, others are likely to notch up considerably higher sales and earnings in the weeks ahead. New Oriental Education and Technology is one of them.
New Oriental Education & Technology Group, Inc. provides private educational services . The company was founded in 1993 and is headquartered in Beijing. New Oriental started out in major cities like Shanghai and Beijing. But it is quickly expanding into other urban areas. It offers its program, service, and products in six areas: language training; test preparation; primary and secondary school; educational content, software, and other technology development and distribution; online education; and other services and products. The company's language training courses primarily consist of various types of English language training courses, and other foreign languages, including German, Japanese, French, Korean, and Spanish. It offers test preparation courses for language and entrance exams used by educational institutions in the United States, the People's Republic of China, and commonwealth countries. The company also operates primary and secondary schools in Yangzhou and Taixing. The Chinese education system requires students to take a wide variety of standardized tests. New Oriental gets them ready, offering classes in English and test preparation for students, beginning at age 5. In addition, New Oriental Education & Technology Group develops and edits content for educational materials for language training and test preparation, such as books, software, CD-ROMs, magazines, and other periodicals. It distributes these materials through various distribution channels consisting of its own classrooms and bookstores, as well as third-party distributors. Further, the company offers various online education programs on its Web site koolearn.com.
Additionally, it provides consulting services to help students through the application and admission process for overseas educational institutions, as well as provides post-secondary educational programs to help students seek career opportunities.
As of May 31, 2007, it distribued its education programs and products through a network of 35 schools, 130 learning centres, and 18 bookstores. It plans to add at least 20 more schools each year for the next several years.
Earnings are excellent. In the most recent quarter, net profit rose 55% to $33.9 million on a 42% increase in revenue. Total enrollment jumped 30.5% to more than 440,000 students.
New Oriental is now expanding aggressively, boosting marketing and building new schools. Plus, the company is expanding into the professional certification training market, providing training for civil service positions, certified public accountants and even the legal profession.
The main downside we can see is that not all Chinese need training and there are only so many training classes that one person can take. But we believe that New Oriental still has several more years of good growth, to go, as they have effectively taken over the training market.
For demographic reasons alone, this is a great place to be. China has hundreds of millions of children eager for education.
The Chinese don't scrimp on education. This is a company with superb growth prospects.
Buy New Oriental Education (EDU: NYSE)