CMB International starts New Oriental Education stock with buy, $104.50 price target

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CMB International starts New Oriental Education stock with buy, $104.50 price target
Credit: © Reuters.

On Thursday, New Oriental Education (NYSE:EDU) received a vote of confidence as CMB International Securities initiated coverage with a Buy rating and a price target set at $104.50. The firm's outlook for the educational service provider is positive, citing New Oriental's strong position in China's after-school tutoring market and an anticipated growth stage following recent business transformations.

CMB International Securities highlighted New Oriental's robust demand and best-in-class teaching resources as key advantages. The company's ability to navigate the changing regulatory landscape in China was also noted as a positive factor. With a benign regulatory environment, New Oriental is expected to embark on a new phase of growth.

The firm forecasts a significant increase in New Oriental's financial performance, projecting a 49% compound annual growth rate (CAGR) in non-GAAP net income from FY24 to FY26E. This optimistic projection is supported by the belief that educational demand is not affected by economic cycles, making it a stable growth industry.

CMB International Securities' price target of $104.50 for New Oriental Education is based on a sum-of-the-parts (SOTP) valuation method. This valuation reflects the firm's confidence in the company's future performance and its ability to capitalize on the consolidating competitive environment within the industry. The initiation at a Buy rating suggests that the securities firm sees significant potential for the stock.

InvestingPro Insights

New Oriental Education's (NYSE:EDU) recent endorsement by CMB International Securities is complemented by several positive indicators from InvestingPro data and tips. The company's market capitalization stands at a robust $14.6 billion, underlining its significant presence in the education sector. With a high gross profit margin of 54.67% for the last twelve months as of Q2 2024, New Oriental Education exhibits strong profitability potential, which is likely a key factor in CMB International's optimistic outlook.

Moreover, the company's impressive revenue growth of 42.17% during the same period signals a robust expansion in its business operations, aligning with the anticipated growth stage following its recent business transformations. This growth trajectory is further evidenced by a substantial 107.8% return on the stock price over the past year, highlighting the positive investor sentiment surrounding the company.

InvestingPro Tips for New Oriental Education reveal that the company holds more cash than debt on its balance sheet and that four analysts have revised their earnings upwards for the upcoming period, suggesting a promising financial outlook. Additionally, the company is trading at a low P/E ratio relative to near-term earnings growth, which may indicate an attractive entry point for investors considering the stock's potential for future earnings expansion.

For those interested in a deeper analysis, InvestingPro offers additional insights, including more InvestingPro Tips for New Oriental Education. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking further valuable information to inform their investment decisions. With 15 additional tips listed on InvestingPro, investors have a wealth of data at their fingertips to help gauge the company's prospects.

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