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TAL Education: A Chinese Lesson
03/22/2016 10:00 am EST
One characteristic of leading growth stocks that sometimes gets overlooked is scale, the size of the potential market for a company’s goods and services, notes growth stock expert Mike Cintolo, editor of Cabot Top Ten Trader.
TAL Education (XRS) is a private education company that provides pre-school through high-school classes, tutoring and test-preparation services in China.
TAL Education—whose name is said to stand for "Tomorrow Advancing Life" -- has grown steadily to its present 300 learning centers in 19 Chinese cities.
The company’s classes vary from personalized private tutoring, to small classes for young learners, to small-sized math, science, English and Chinese classes, to a large online learning site with over 350,000 registered students.
TAL Education has scale, with lots of room for further expansion, either organically or via M&A, as the private education market in China is highly fragmented, with the top three players controlling less than 4% of the market.
TAL Education acquired Firstleap Education (and its 60 learning centers and 20,000 students) in September 2015 and took a $30 million stake in Phoenix E-Learning in October.
After two years of revenue growth of 39% and 38%, TAL Education has booked four quarters of revenue growth over 40%.
Despite economic woes in China, consumers there appear eager to spend money on education, and TAL Education is a successful and growing player in that arena.
XRS blasted off in October, soaring from $31 on October 1st to $49 on December 21st.
After a correction to $42 in January, the stock popped back to $50 then fell victim to the general market weakness in February, dipping to $43.
But the stock got hot again and recently roared higher on big volume; it is now trading above $50 in new-high territory.
A buy on any weakness looks solid; with a fairly loose stop at $44 to give this volatile issue some wiggle room.
By Mike Cintolo, Editor of Cabot Top Ten Trader
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