These three Chinese providers of educational and tutoring services have increased their allocations to the purchase of fixed assets enormously over the past five years. This suggests that the companies may expect higher demand for their services in the next years.
Higher demand would mean higher sales, which would ideally improve net earnings as long as resources are used in an efficient and effective manner.
TAL Education Group
The first company under consideration is TAL Education Group (TAL, Financial).
The company has increased its allocations to the purchase of property and equipment over the past five years tremendously, passing from $11 million in full-year 2014 to $350 million in full-year 2019.
Wall Street analysts forecast that TAL Education Group will see its net earnings per share skyrocket by 710% next year and increase by 29.10% on average every year over the next five years.
Wall Street recommends a buy rating for this stock with an average target price of $61.78 per share.
Over the past year the stock has gained 38.2%, closing at a price of $50.65 per share on April 3.
The stock has a market capitalization of $29.97 billion, a price-earnings ratio of 281.39 versus the industry median of 15.04, a price-book ratio of 12.13 versus the industry median of 1.47 and a price-sales ratio of 9.45 compared to the industry median of 1.4.
New Oriental Education & Technology Group Inc
The second company under consideration is New Oriental Education & Technology Group Inc (EDU, Financial).
The company has grown its allocations to the purchase of fixed assets largely over the past five years, investing $269.1 million in full-year 2019 versus $31.7 million in full-year 2014.
Wall Street analysts estimate that New Oriental Education & Technology Group will increase its net earnings per share by 39.6% next year and 35.95% on average every year over the next five years.
Wall Street recommends a buy rating for this stock with an average target price of $156.72 per share.
In the past year, the stock has climbed 19.3%, closing at a price of $106.51 per share on April 3.
The stock has a market capitalization of $16.87 billion, a price-earnings ratio of 42.1 versus the industry median of 15.19, a price-book ratio of 6.5 compared to the industry median of 1.51 and a price-sales ratio of 4.85 compared to the industry median of 1.39.
Hailiang Education Group Inc
The third company that meets the above-listed criteria is Hailiang Education Group Inc (HLG, Financial).
The company has grown its allocations to capital spending dramatically over the past five years, purchasing property and equipment for almost $12 million in full-year 2019 versus $1.4 million in full-year 2014. Also, during the past five years, investments in fixed assets reached two peaks of $23.5 million in full-year 2015 and $52.6 million in full-year 2016.
Wall Street recommends an overweight rating for this stock.
Over the past year, the share price has climbed 35.1%, closing at $56.55 on April 3.
The stock has a market capitalization of $1.46 billion, a price-earnings ratio of 27.06 compared to the industry median of 15.04, a price-book ratio of 5.51 versus the industry median of 1.47 and a price-sales ratio of 6.71 versus the industry median of 1.4.
Disclosure: I have no positions in any securities mentioned.
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