Like Grand Canyon Education (LOPE)? Consider TAL Education (TAL)!

This is the second in my series of five emerging market stocks that I think present excellent opportunities for growth investors. And in a shameless bid to interest home-focused U.S. investors, I’m going to contrast each one with a well-known U.S. company.

Grand Canyon Education (LOPE), a post-secondary education company based in Phoenix, Arizona, is one of the top for-profit universities in the U.S., with 80% of students enrolled online and 20% attending at the West Phoenix campus. Founded in 1949, as a Baptist University, the company became a for-profit enterprise in 2004 and now offers bachelor’s, master’s and doctoral degrees in fast-emerging fields.

Grand Canyon has been hurt in the past by the terrible reputation (generally well-deserved) of online colleges that prey on veterans and others who sign on for programs that promise high job placement rates but don’t deliver. The Obama administration’s crackdown on shady marketing practices put some offenders out of business, but Trump’s victory—and his support for repeal of protective legislation—had an immediate positive effect on for-profit education businesses. Grand Canyon enjoyed 12% revenue growth in 2016, a growth number that has been shrinking steadily from 20% in 2012. Earnings were up 26% in Q1 and are forecast to grow 15% in 2017 and 8% in 2018.

LOPE broke out of a multi-year flat stretch just ahead of the U.S. election, soaring from 40 in October to 58 at the end of 2016. The stock got a burst of energy from a great earnings report in February 2017 that touched off a new rally that eventually kicked the stock to 83 in June. While LOPE has corrected back to 77 in recent trading, there’s no doubt that it represents the fastest horse in the U.S. education stock race.

Grand Canyon’s stock has been strong enough to earn a place in Cabot Top Ten Trader in June, which is a badge of honor for any growth stock. But if you’re interested in an education stock, I have an even better alternative.

TAL Education Group (TAL) is one of two very strong Chinese for-profit education companies. I’m choosing to feature TAL Education because I like its chart a bit better than its main rival (New Oriental Education, EDU).

Education in China is taken extremely seriously. When China had a single-child policy, there were four grandparents and two parents whose hopes for the future were centered on one kid. And even now that single-child has been repealed, families spare no expense seeking every advantage for their children, a program that often includes private education. And TAL Education is the most successful private educator in China.

The company’s K–12 programs offer instruction and tutoring in math, English, Chinese, physics, chemistry and biology. The company’s courses are offered online, but the real money is made in small-class and one-on-one tutoring formats.

TAL Education has grown from one learning center in Beijing in 2003 to 507 learning centers in 30 cities across China. (Note: When I added TAL to the portfolio of Cabot Global Stocks Explorer back in May 2015, that number was 289 learning centers in 19 cities.)

The company’s fundamentals are also admirable, with 68% revenue growth in the fiscal year that ended in February 2017. The latest quarterly report featured 81% revenue growth and 104% growth in earnings per share. And analysts are calling for earnings growth of 24% this year and 52% next year.

All that growth has made TAL a favorite of investors, as illustrated by this weekly chart.

So, if you like LOPE, I’d say there are plenty of good reasons to add a little TAL to your portfolio. This is the kind of stock that subscribers to Cabot Global Stocks Explorer have been discovering for well over a decade.

Just be aware that TAL Education will report its latest quarterly results on Thursday, July 27, before the market opens. Analysts’ estimates are calling for revenue a little over $307 million and earnings of 28 cents per share. The stock’s short-term future will depend on how investors react to the actual numbers.

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TAL Education (XRS): Nice tailwind from quarterly report

By Paul Goodwin, Chief Analyst, Cabot Global Stocks Explorer
From Cabot Wealth Advisory 4/28/16 Sign up for Cabot Wealth Advisory—it’s free!

My stock pick today is TAL Education (XRS), a Chinese education stock that we covered in Cabot Top Ten Trader in early February. The stock made a nice move today after reporting earnings before the market opened this morning. XRS is now up from 49 to 59 since April 5, and with a nice tailwind from a well-received quarterly report, the stock should have more fuel in its tank.

And as an individual investor, you can buy it here today. But if you’d like to receive more information on the stock or additional momentum stocks featured in the advisory, consider taking a trial subscription to Cabot Top Ten Trader. The advisory has a great selection of momentum stocks ready to break out. Since the beginning of the year, we handed investors 67 winning trades and there are many more to come.
Click here for details.

TAL Education (XRS): Profitable and growing

By Timothy Lutts, Chief Analyst, Cabot Stock of the Month
From Cabot Wealth Advisory 4/25/16 Sign up for Cabot Wealth Advisory—it’s free!

TAL Education (XRS) is one of the largest private educators in China, offering a variety of services for students from pre-school through high school. Using three formats—small classes, personalized tutoring and online courses—it teaches core topics like math, English, Chinese, physics, chemistry and biology.

Unlike Amazon and Tesla, TAL Education is profitable now, and growing at a good clip; revenues were up 38% in 2015, while earnings were up 22%. This year, earnings are expected to grow 27% (the first-quarter report is due Thursday, April 28).

And, of course, very few investors in the U.S. have ever heard of the company. Thus, at the least, I think the company will do well as it grows, and the stock will do well, too. But just imagine what might happen as more and more U.S. investors become aware of the company and slowly upgrade their opinion of Chinese education? And, thinking creatively, what might happen if the company enters the U.S. market, to begin competing in our overpriced, underperforming elementary and high school systems?

I can’t predict what’s going to happen, but it’s pretty clear from watching the chart that investors’ perceptions are already improving.

And, as I’ve said many times, trends tend to go further and last longer than most people expect.

So, you could take a flyer and jump on XRS right now (just be careful to use the proper symbol, not TAL). But a better idea would be to become a regular reader of Paul Goodwin’s Cabot Global Stocks Explorer. Paul recommended XRS to his readers back in December, just as it broke out from its long base at 39, and those readers are now sitting on solid profits, while expecting the stock to climb much higher. Click here for more information.


TAL Education Group (XRS): Specializes in tutoring services

By Paul Goodwin, Chief Analyst, Cabot China & Emerging Markets Report
From Cabot Wealth Advisory 8/21/14 Sign up for Cabot Wealth Advisory—it’s free!

My stock pick this week is a Chinese education stock I recommended for my subscribers back in June. The company is TAL Education Group (XRS), a company that specializes in K-12 after-school tutoring services, including small group, one-on-one and online courses. The company offers classes in math and science and English, with a division for teaching young learners (age three to eight) and another for personalized premium educational services.

The company operates in 16 key Chinese cities, with 274 learning centers, 90 of which are devoted to personalized premium services. Plus, TAL operates the largest online education community in China.

The company has $270 million in cash on hand and no debt. Its Q2 earnings report showed a 69% jump in earnings, not as good as the four consecutive quarters of triple-digit earnings growth in the previous year, but still quite strong. And revenue growth was a robust 45%.

XRS floundered around after its October 2010 IPO at 10, finally putting in a bottom at 7 in September 2012. Since then the stock has been in a strong rally, with a modest four-month correction from January through May that helped to shake out weak hands and reset its buyability. The stock broke out in June and again in late July. I like it.

Click here for more information.

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TAL International Group (TAL): Benefiting from strong demand for shipping containers

By J. Royden Ward, Editor of Cabot Benjamin Graham Value Letter
From Cabot Wealth Advisory 3/14/11 Sign up for free Cabot Wealth Advisory e-newsletter

This company is one of the biggest in the intermodal freight container business and is experiencing a huge increase in demand for the use of its containers.

TAL International Group (TAL) is one of the world’s largest lessors of intermodal containers and chassis. The company buys intermodal containers that can be transported on ships, trucks and railcars enabling containers full of goods to travel great distances with a minimum of handling.

TAL’s operations include buying, leasing and subsequently selling multiple types of intermodal containers. TAL is also involved in reselling containers to container traders and users of containers, as well as financing port equipment, such as container cranes, reach stackers and related equipment. The company owns 856,000 intermodal containers.

Demand for containers dwindled in 2009, but rebounded with a vengeance in 2010. TAL’s utilization rate reached a record 98.6% at the end of 2010 despite adding 180,000 containers during the year. Container purchases are primarily financed by the company’s bond offerings. TAL’s bonds are rated “A” by Standard & Poor’s and carry an interest rate of 4.8%.

Strong demand is causing a global shortage for containers, which is driving leasing rates and resale prices significantly higher—all to the benefit of TAL. Part of the stronger demand can be attributed to reduced direct container purchases by TAL’s shipping customers to avoid new capital expenditures.

TAL has already ordered another 180,000 containers for delivery in 2011, many of which have already been committed to leases. As a result, the company expects profits to accelerate during the next several quarters. Sales increased 7% and EPS catapulted from $0.72 in 2009 to $2.32 in 2010. My best guess is that sales will rise 18% and EPS will increase 25% to $2.90 in 2011. Growth in 2012 will likely decelerate.

At 11.9 times my 2011 EPS estimate and with a big dividend yield of 5.2%, TAL shares are very attractive, but speculative. I recommend buying TAL at the current price.

Editor’s Note: You can find additional stocks selling at bargain prices in the Cabot Benjamin Graham Value Letter. In every issue, you’ll find my legendary Maximum Buy and Minimum Sell Prices for over 250 stocks. And now you can take advantage of our recently introduced cloud computing BGV Top 250 spreadsheet, which provides forecasts, ratings and data on 250 stocks, 24 hours a day. Click here to get started today!



Roy Ward
J. Royden Ward


Editor of Cabot Benjamin Graham Value Letter
 
A lifelong investment professional, J. Royden Ward applies his 40 years of investment research, portfolio management, writing and publishing experience to his role as analyst and editor of Cabot Benjamin Graham Value Letter, which is directed to long-term investors seeking a guide to profitable value investing based on the time-tested systems originally developed by Benjamin Graham, the Father of Value Investing. A second-generation disciple of Benjamin Graham, Roy in 1969 pioneered the development of a computerized model that applied the formulas developed by Graham using a unique ranking system. Today, Roy applies his system to two models in the Value Letter.

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