Long-established in the Education industry, New Oriental Education & Technology Group Inc (EDU, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 4.3%, juxtaposed with a three-month change of 44.92%. However, fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of New Oriental Education & Technology Group Inc.
Decoding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 7/10
- Profitability rank: 7/10
- Growth rank: 2/10
- GF Value rank: 1/10
- Momentum rank: 3/10
Based on the above method, GuruFocus assigned New Oriental Education & Technology Group Inc the GF Score of 60 out of 100, which signals poor future outperformance potential.
Understanding New Oriental Education & Technology Group Inc's Business
New Oriental is a leading private education provider in China. K-9 academic after-school tutoring used to account for 50%-60% of New Oriental's revenue before the regulatory crackdown in 2021. After terminating its K-9 academic after-school tutoring business, New Oriental has identified a few new initiatives such as nonacademic tutoring and intelligent learning systems and devices. The remaining businesses include high school academic after-school tutoring and overseas-related test preparation and consulting business. It also owns 55.7% of East Buy (HKG: 01797), a market leader in livestreaming e-commerce.
Growth Prospects
A lack of significant growth is another area where New Oriental Education & Technology Group Inc seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by -7.4 per year over the past three years, which underperforms worse than 78.63% of 234 companies in the Education industry. Stagnating revenues may pose concerns in a fast-evolving market.
Lastly, New Oriental Education & Technology Group Inc predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. While New Oriental Education & Technology Group Inc has a commendable history, its future seems fraught with challenges. Will it be able to navigate these headwinds and maintain its market position? Only time will tell.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
