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Is Now The Time To Put New Oriental Education Technology Group (NYSE:EDU) On Your Watchlist?

Simply Wall St

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

So if you're like me, you might be more interested in profitable, growing companies, like New Oriental Education & Technology Group (NYSE:EDU). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for New Oriental Education & Technology Group

How Fast Is New Oriental Education & Technology Group Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, New Oriental Education & Technology Group has grown EPS by 11% per year. That's a good rate of growth, if it can be sustained.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. New Oriental Education & Technology Group maintained stable EBIT margins over the last year, all while growing revenue 25% to US$3.3b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

NYSE:EDU Income Statement, October 30th 2019

Fortunately, we've got access to analyst forecasts of New Oriental Education & Technology Group's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are New Oriental Education & Technology Group Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$19b company like New Oriental Education & Technology Group. But we are reassured by the fact they have invested in the company. Indeed, they have a glittering mountain of wealth invested in it, currently valued at US$2.5b. That equates to 13% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.

Should You Add New Oriental Education & Technology Group To Your Watchlist?

As I already mentioned, New Oriental Education & Technology Group is a growing business, which is what I like to see. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. Another important measure of business quality not discussed here, is return on equity (ROE). Click on this link to see how New Oriental Education & Technology Group shapes up to industry peers, when it comes to ROE.

Although New Oriental Education & Technology Group certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.