New Oriental Education & Technology Group Inc. (NYSE:EDU) last week reported its latest annual results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Revenues of US$3.6b were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at US$2.59, missing estimates by 4.1%. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the most recent consensus for New Oriental Education & Technology Group from 24 analysts is for revenues of US$4.19b in 2021 which, if met, would be a solid 17% increase on its sales over the past 12 months. Per-share earnings are expected to shoot up 26% to US$3.28. In the lead-up to this report, the analysts had been modelling revenues of US$4.59b and earnings per share (EPS) of US$3.64 in 2021. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a small dip in earnings per share estimates.
Despite the cuts to forecast earnings, there was no real change to the US$162 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic New Oriental Education & Technology Group analyst has a price target of US$183 per share, while the most pessimistic values it at US$145. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that New Oriental Education & Technology Group's revenue growth is expected to slow, with forecast 17% increase next year well below the historical 23%p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 20% next year. So it's pretty clear that, while New Oriental Education & Technology Group's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. They also downgraded their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider industry. The consensus price target held steady at US$162, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on New Oriental Education & Technology Group. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple New Oriental Education & Technology Group analysts - going out to 2025, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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. 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.
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