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On Aug 17, Zacks Investment Research upgraded Beijing based provider of computer-based testing and testing-related services, ATA Inc. to a Zacks Rank #1 (Strong Buy), following solid first quarter 2014 results released on Aug 9.

Why the Upgrade?

One of the leading providers of computer-based testing services in China, ATA surpassed the Zacks Consensus Estimate on both counts in the first quarter of 2014. The company’s earnings of 6 cents surpassed the Zacks Consensus Estimate of 2 cents by 200% and the prior-year quarter level by 50.0% on the back of solid revenue increase and gross profit expansion.

Revenues of $15.0 million beat the Zacks Consensus Estimate of $13.0 million by 12.8% in first quarter 2014. Revenues were up 4.3% year over year on the back of volume growth of billable tests, like CBA exam, and TOEIC and HR Select exams. Gross profit grew 2.8% in the quarter to $3.3 million.

ATAI operates one of the largest authorized test centers throughout China. These testing services allow students to obtain professional recognition. With a large number of students qualifying in China, ATA believes there will be a growing demand for its testing services in the upcoming quarters.

For fiscal 2014, the company expects net revenue to range between $65.66 million and $68.92 million, compared to $59.7 million in the prior year.  Adjusted net income is likely to be in the range of $6.02 million to $7.65 million compared to $5.9 million in the prior year.

Other Stocks to Consider

Other education companies that are performing well include Capella Education Company (CPLA - Analyst Report), Grand Canyon Education, Inc. (LOPE - Snapshot Report) and TAL Education Group (XRS - Snapshot Report).  Capella carries a Zacks Rank #1 (Strong Buy), while Grand Canyon and TAL Education carry a Zacks Rank #2 (Buy).

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