Breakouts in Chinese Education

04/21/2016 10:00 am EST


Leo Fasciocco

Investment Columnist and Publisher, Ticker Tape Digest

Leo Fasciocco specializes in finding stock that have either broken out of technical bases, or are poised to do so. Here, the editor of Ticker Tape Digest looks at two China-based education plays poised for a breakout.

Tarena International (TEDU)

Tarena provides information technology educational courses in China, using live distance instruction, classroom-based tutoring, and online learning modules. Annual revenues are $169 million.

It offers education courses in IT subjects, such as Java, C++, software testing, Android, iOS, and Linux and network engineering; it also offers three non-IT subjects comprising digital art, online sales and marketing, and accounting.

This year, analysts are forecasting a 35% leap in net to 66 cents a share from 49 cents a year ago. The stock sells with a price-earnings ratio of 17. We see that as attractive for value-growth investor.

Looking out to 2017, the Street predicts a 35% jump in net again, carrying profits to 89 cents a share from the anticipated 66 cents this year.

We suggest a partial stake with additional buying on any breakout over $11.45, which could come at any time.

TAL Education (XRS)

We are then targeting the stock for a move to $15. Meanwhile, Tal Education  — with annual revenues of $568 million — provides K-12 after-school tutoring services through 289 learning centers and 267 service centers in China.

It also operates an online education platform offering high school and college entrance examinations.

Analysts are forecasting a 63% leap in XRS's earnings for the fiscal year ended in February to $1.34 a share from 82 cents a year ago; they will report on April 28th.

Looking out to fiscal 2017, analysts predict a modest 5% increase in net to $1.41 a share compared with the anticipated $1.34 in fiscal 2016.

The stock just recently broke out to the upside. We are now targeting the stock for a move to $65 per share. A protective stop can be place near $50, giving the stock room.

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By Leo Fasciocco, Editor of Ticker Tape Digest

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