In this commentary, I will examine TAL Education Group's (NYSE:TAL) latest earnings update (31 May 2019) and compare these figures against its performance over the past couple of years, as well as how the rest of the consumer services industry performed. As an investor, I find it beneficial to assess TAL’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
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 look at what's occurring with margins and whether the entire industry is facing the same headwind.
In terms of returns from investment, TAL Education Group has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. However, its return on assets (ROA) of 4.9% exceeds the US Consumer Services industry of 4.9%, indicating TAL Education Group has used its assets more efficiently. Though, 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. I recommend you continue to research TAL Education Group to get a better picture 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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