Friday, August 17, 2007
Language lessons boost New Oriental
Tony Sagami, editor of Asia Stock Alert, calls China's New Oriental Education (NYSE: EDU) -- which offers English language instruction -- the “single best stock idea in the world.”
“New Oriental Education reported their quarterly results and they were very good ... but not good enough. New Oriental reported a 4 cent per share loss for the quarter, which was a 65% improvement over the same period last year but below the 1 cent profit Wall Street was expecting.
“The reason for the shortfall was simple: New Oriental spent a bunch more money on
marketing/advertising. While all that extra spending hurt profits last quarter, it should pay off in spades down the road. In fact, that’s why revenues jumped by 29% to $24.9 million, slightly ahead of the consensus estimate of $24 million.
“Total student enrollments in language training and test preparation courses for the quarter ending May 31 increased by 31.5% year-over-year to approximately 314,000. Plus, the spring is typically a slow quarter as students focus on their end-of-year examinations.
“The summer, by the way, is the busiest and most profitable time of the year. There was plenty of good news that got my attention though.
Revenues exceeded the high-end of its revenue guidance by $0.7 million and the last 12 months was the first year in which New Oriental student enrollment exceeded 1 million students.
Year-over-year sales from books and other education materials and services rose 31.1% to $2.8 million.
New Oriental was able to increase its course prices by 13%, which shows very strong pricing power.
The overseas test prep division for Chinese students that want to attend college in the U.S. jumped from 120,000 last year to 160,000 over the last 12 months..
“Nothing is wrong here and I still consider New Oriental the single best stock idea in the world. For those who do not own this issue, this is the very first stock you should add to your Asia portfolio. Buy.”
posted at 3:09 PM
