We came across a bullish thesis on TAL Education Group (TAL) on Substack by Oliver | MMMT Wealth. In this article, we will summarize the bulls’ thesis on TAL. TAL Education Group (TAL)’s share was trading at $12.40 as of Jan 29th. TAL’s trailing and forward P/E were 64.14 and 28.17 respectively according to Yahoo Finance.
A student concentrate on their laptop in the library, taking advantage of an educational program online.
TAL Education Group (TAL) is a Chinese education company specializing in tutoring services for students from preschool through high school. The company operates through two main segments: learning services, which primarily consists of Peiyou small classes, and content solutions, which is driven by smart learning devices. TAL has made significant progress in its financial performance, with net revenues rising to $606.4 million, up from $375 million in the previous year. The company has turned around its profitability, posting a net income of $23.1 million compared to a loss of $23.9 million last year. Earnings per share (EPS) reached $0.04, and its cash reserves increased by approximately $800 million, bringing cash and cash equivalents to $3.8 billion.
TAL’s investment thesis centers around its early and extensive adoption of AI technology, which sets it apart from competitors like EDU and GOTU. The company’s XBook, powered by a large language model (LLM) and integrated with cutting-edge AI technologies, is a key innovation. This tool holds significant potential to drive cost reductions, increase margins, and enhance operational performance by personalizing learning experiences, ultimately boosting sales and retention. TAL’s stock trades at a valuation of 2.0x, reflecting an impressive 62.4% revenue growth, which is almost unparalleled in the industry. However, given the operational challenges associated with being based in China, a discount is applied to its valuation. Despite this, the company’s strong financial turnaround, AI-driven innovation, and robust growth prospects present a compelling investment opportunity with substantial upside potential, especially if its technology continues to disrupt the educational landscape.
TAL Education Group (TAL) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 29 hedge fund portfolios held TAL at the end of the third quarter which was 33 in the previous quarter. While we acknowledge the risk and potential of TAL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TAL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.