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New Oriental Education & Technology Group (NYSE:EDU) stock falls 14% in past week as one-year earnings and shareholder returns continue downward trend

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Even the best investor on earth makes unsuccessful investments. But serious investors should think long and hard about avoiding extreme losses. We wouldn't blame New Oriental Education & Technology Group Inc. (NYSE:EDU) shareholders if they were still in shock after the stock dropped like a lead balloon, down 89% in just one year. That'd be a striking reminder about the importance of diversification. Even if you look out three years, the returns are still disappointing, with the share price down66% in that time. The falls have accelerated recently, with the share price down 24% in the last three months. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

Since New Oriental Education & Technology Group has shed US$526m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for New Oriental Education & Technology Group

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Unhappily, New Oriental Education & Technology Group had to report a 22% decline in EPS over the last year. The share price decline of 89% is actually more than the EPS drop. So it seems the market was too confident about the business, a year ago. The P/E ratio of 9.39 also points to the negative market sentiment.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
earnings-per-share-growth

Dive deeper into New Oriental Education & Technology Group's key metrics by checking this interactive graph of New Oriental Education & Technology Group's earnings, revenue and cash flow.

A Different Perspective

Investors in New Oriental Education & Technology Group had a tough year, with a total loss of 89%, against a market gain of about 19%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 2 warning signs for New Oriental Education & Technology Group that you should be aware of.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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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.