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Bear of the Day: Tal Education (TAL)

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David Bartosiak
·3 min read
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At one time, being at the intersection of an internet stock and a Chinese stock was a great idea. In fact, today’s Bear of the Day was once a very high-flyer. But the stock market is a fickle beast and the champions of yesterday quickly become the mayors of Loserville. While earnings estimates may be pointing to tougher times ahead for today’s Bear, there is always hope on the horizon. Let’s dig into the number on this one, shall we?

Today’s Bear of the Day is Tal Education Group (TAL). TAL Education Group provides K-12 after-school tutoring services in the People's Republic of China. The company offers tutoring services to K-12 students covering various academic subjects, including mathematics, physics, chemistry, biology, history, geography, political science, English, and Chinese. It also provides tutoring services primarily through small classes under the Xueersi, Mobby, and Firstleap brand names; personalized premium services under Izhikang name. In addition, the company operates jzb.com, an online education platform that serves as a gateway for online courses offered through xueersi.com; and other Websites for specific topics and offerings, such as college entrance examinations, high school entrance examinations, graduate school entrance examinations, preschool education, and raising infants and toddlers, as well as mathematics, English, and Chinese composition. 

Technically, TAL is in the Schools industry which ranks in the Bottom 13% of our Zacks Industry Rank. Currently, the stock is Zacks Rank #5 (Strong Sell). You would think that in this new “Stay-Home” world we live in, that an online school would have strong earnings this period. While the growth has been very strong year-over-year, analysts have been tempering their expectations. Over the last sixty days, analysts have been cutting their earnings estimates for the stock. Current year Zacks Consensus Estimates have come down from 59 cents EPS to 11 cents. Next year’s number is off from $1.18 down to 92 cents.

While that may be the bear case, there is still a very strong case for the bulls here. Even down at 92 cents for next year, the company is forecast for 736% earnings growth. The big percentage number is less impressive when you realize it’s being compared to just 11 cents this year. However, the revenue numbers are strong too. Current year revenue growth is forecast to come in at 28.98% while next year is set for 44.64% growth.

Investors looking for other names in the same industry with better Zacks Ranks have a couple of options to investigate further. GP Strategies (GPX) is a Zacks Rank #1 (Strong Buy) while Adtalem Global Education (ATGE) is a Zacks Rank #2 (Buy).

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