Event driven interest in TAL Education Group stock

TAL Education Group (TAL) is back in focus after fourth quarter results topped analyst expectations on both earnings and revenue, along with a reported rise in institutional ownership that has drawn fresh attention to the stock.

The recent earnings beat and increased institutional ownership come at a time when TAL Education Group’s share price is under pressure, with the stock down 6.24% on a 1 month share price return basis and 20.28% year to date. However, a 3 year total shareholder return of 53.18% shows longer term holders have still seen gains even as the 1 year total shareholder return fell 14.79%.

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So with TAL Education Group delivering stronger than expected quarterly results while the share price sits close to its 52 week low, is the stock still undervalued, or is the market already pricing in the company’s future growth?

Most Popular Narrative: 41.1% Undervalued

On the most followed narrative, TAL Education Group’s fair value of $15.55 sits well above the last close at $9.16, putting the current share price against a materially higher long term estimate built on detailed cash flow and earnings assumptions.

The analysts have a consensus price target of $15.55 for TAL Education Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $18.67, and the most bearish reporting a price target of just $11.54.

This narrative leans heavily on a specific path for revenue expansion, profit margins and the earnings multiple that might apply several years out. It raises the question of which combination of growth, profitability and discount rate assumptions is working hardest to justify that gap between $9.16 and $15.55.

Result: Fair Value of $15.55 (UNDERVALUED)

However, TAL Education Group’s story could change quickly if K-12 growth tapers faster than expected or if loss making learning devices and higher marketing spend weigh more heavily on margins.

Next Steps

With sentiment on TAL Education Group clearly mixed, use this moment to move quickly, review both the concerns and the upside, and weigh the 5 key rewards and 2 important warning signs.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.