New Oriental Education & Technology Group Inc.’s stock price has surged to a price of $94.66 today. Ending the day with a 3.1% increase, EDU shares outperformed the S&P500 and Dow Industrial composite indices by 3.0%, closing in on their 52 week high of $95.84 Over the last 12 months, New Oriental Education & Technology is up 115.4%, and has outperformed the S&P 500 by 88.1%. Now, the Large-Cap Real Estate company is nearing its average target price of $91.2 and has an average analyst rating of buy.
New Oriental Education & Technology's trailing 12 month price to earnings (P/E) ratio is 52.6, which is its share price divided by its trailing earnings per share (EPS) of $1.8. The company has a forward P/E ratio of 23.7 based on its forward EPS of $3.99 -- which is an estimate of future earnings provided by management. The P/E ratio tells us how much investors are willing to pay for each dollar of the company's net earnings from its sales operations. By way of comparison, the average P/E ratio of the Real Estate sector is 25.55, but a company's price can remain stable for a long time even if it is over or undervalued.
An alternative form of measuring a company's valuation is to focus on its Price to Book (P/B) Ratio, or the company's market price per share divided by its book value per share. The book value refers to the present value of the company if it were to be liquidated today (i.e. selling all assets and paying off all debts). New Oriental Education & Technology's P/B ratio indicates that the market value of the company exceeds its book value by a factor of 4.0, but is still below the average P/B ratio of the Real Estate sector, which stands at 2.1.
Since it has a a higher P/E ratio than its sector average, a higher than Average P/B Ratio, No published cashflows, and weak operating margins, New Oriental Education & Technology is probably overvalued at current prices. Make sure to complement this brief quantitative review with a qualitative analysis of your own!
