On Thursday, JPMorgan reiterated its Overweight rating and $17.00 price target for TAL International (NYSE:TAL) shares. The firm's analysts were impressed by TAL's recent financial results, which showcased a significant 62% year-over-year top-line growth. According to InvestingPro data, TAL maintains a strong financial health score of GOOD, with a current ratio of 3.06x indicating robust liquidity. This performance exceeded the 44% growth expected by consensus and represented an acceleration from the already robust 50%+ growth seen in recent quarters. The analysts noted that this growth was double that of TAL's competitor, EDU, which reported a 31% increase in core revenue.
The positive outcome was attributed mainly to TAL's smart learning pad, but the firm also highlighted the continued 'super-normal' growth of around 70% in non-academic tutoring. While TAL's operating profit margin (OPM) of -0.3% was slightly better than the -2.4% consensus, the company maintains impressive gross profit margins of 53.93%. The analysts believe the OPM factor doesn't significantly impact the stock due to seasonal trends that typically lead to a break-even third quarter.
JPMorgan's commentary emphasized the value TAL offers to long-term investors, citing a 9x price-to-earnings ratio on calendar year 2026 or fiscal year 2027 estimates when margins are expected to normalize. Based on InvestingPro's Fair Value analysis, TAL currently appears undervalued. The firm's positive outlook on TAL is based on the scale and longevity of the company's growth runway, affirming TAL as the only Overweight-rated company in the China Education space in their coverage. Discover 12 additional key insights about TAL and access comprehensive financial analysis through the Pro Research Report, available exclusively on InvestingPro.
In other recent news, TAL Education Group has reported strong growth in its latest financial results. The company demonstrated a significant year-over-year increase in both net revenues and non-GAAP net income for its Fiscal 2025 Second Quarter. Specifically, TAL Education Group announced a 50.4% increase in net revenues, totaling $619.4 million, and non-GAAP net income rose to $74.3 million.
Despite high R&D costs causing current non-profitability in its learning devices segment, TAL Education Group is continuing investment in this area, highlighting the launch of the Xbook device which reported 80% active weekly users. Furthermore, the company has extended its share repurchase program by 12 months, allowing for up to $503.8 million in buybacks.
In terms of future expectations, management anticipates seasonal fluctuations but maintains a focus on long-term growth and technological advancements. The company also plans to refine learning programs and optimize marketing strategies. However, it's worth noting that the company's learning devices segment is currently not profitable due to high R&D and operational costs, and long-term growth rates for the Peiyou small class business are expected to taper. Despite these challenges, TAL's Peiyou small class business has seen growth driven by increased customer interest. These are some of the recent developments for TAL Education Group.
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