There's a business that I've admired for quite some time and it's related to the education business in the world's fastest-growing large economy.New O...
There's a business that I've admired for quite some time and it's related to the education business in the world's fastest-growing large economy.
New Oriental Education & Technology Group,
Inc. (NYSE/EDU) is in the business of selling education in China. In particular, this company specializes in teaching Chinese students the art of writing and speaking English. Founded in 1993, the company offers a myriad of educational services, targeting youngsters and adults with full primary and middle school education, as well as English language training and a variety of other courses for adults. The company also publishes all kinds of educational material, provides online courses of study, and operates private schools throughout China.
In its latest quarter, the second fiscal quarter of 2009 ended November 30, 2008, New Oriental generated revenues of almost forty-nine and a half million dollars, representing a substantial 54% increase over the same quarter last year.
The company reported that, in spite of a weakening economic environment, its growth is being driven by new student enrollments in language training and test preparation courses. New Oriental cited that its total student enrollments in language training and test preparation courses in its latest quarter grew 13% to approximately 292,200.
Net income for the company’s second fiscal quarter was $3.1 million, representing a 58% increase over the same period last year. Diluted earnings per share were the same at $0.08.
New Oriental finished its most recent quarter with one hundred and eighty-three million dollars in cash and without material debt.
Looking to the third quarter of fiscal year 2009 ending February 28, 2009, the company expects its sales to be in the range of sixty-five million dollars to sixty-eight million dollars, representing year-over-year growth of between 36% and 40%, respectively.
I really like the education business and there are very few proven operators in the field. Domestically, one of the best in the business is DeVry, Inc. (NYSE/DV), which also just reported excellent financial results in a weak economy.
Private education isn't recession-proof, but the numbers surely indicate that it is more recession-resistant than other industries. This makes sense, because a lot of people who lose their jobs go back to school to upgrade their skills or retrain for another career.
Being a pure-play Chinese stock, New Oriental Education has been a volatile trader on the stock market, and it is currently down some 30 points from its 52-week high. DeVry has fared much better on the stock market, experiencing only a small retrenchment in its stock price last October. The stock recovered quickly, and is now trading on strength from its latest earnings report.
The private education business will continue to be an industry that flourishes over the coming years, particularly in Asia. I suppose we're pretty fortunate to grow up doing business in our native tongue. For Chinese students, learning the international language of business is a real chore.
Profit Confidential
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