
If you have a teenager going through the college application process right now, studying for SATs and taking courses, you know what kind of money gets poured into private prep services in order to give your kid the competitive edge. Now take that and apply it to the rapidly growing economy of China and its drive to push its students ahead of the curve. This is where New Oriental Education & Technology Group Inc. (NYSE:
EDU) comes into play.
This large market cap company is China's largest provider of private educational services. In some ways it is like the Chinese Kaplan or Princeton Review (two of its competitors in fact), but also much more. Founded in 1987, its educational offerings include everything from English (and other foreign language) training, to test preparation for both U.S. and Chinese admissions and assessment tests. What's more, it also develops and distributes educational material to schools.
New Oriental's reach is extensive. In fiscal year 2006, student enrollments numbered over 872,000. The educational content it develops was delivered to dozens of schools and over 5000 bookstores, and to 1,700 teachers and over 2 million online users. In addition to test prep, language skills, and education content development and delivery, the company also offers consultation in the overseas education application and admissions process, including logistical issues like how to get visas and where to live.
Enrollment in New Oriental's programs and services shows no sign of letting up. It only just went public this September, but I like what it has to offer, and the prospects for growth are strong. Plus, my friends who visit China or who have family there have told me about this company and its competitive advantage throughout China. Although test preparation is a big part of the business, the English language classes could drive huge growth.
Type of stock: A big-cap Chinese education services developer, trainer and provider, this company is positioned as a market leader in an area with strong demand that is only growing.
Price target: A recent analyst's "buy" recommendation sent this stock up to near its 52-week high of $44.80 (currently at $40.81), though it has dipped as low as $20.60 in the past year. Despite being an unproven stock, I'm not shrinking from New Oriental. You might want to wait for it to drop into the high $30s for a real value, but I see EDU at the front of a growing market. I think it has potential to reach into the $50s by the end of the year.
Hilary Kramer is a financial editor and money coach for AOL and an authority on investing. Visit her at www.hilarykramer.com.