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Bull of the Day: TAL Education (TAL)

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Chinese stocks have come into favor recently as investors have become more comfortable with the reporting. I remember the skepticism investors had over early Alibaba numbers. Are the books cooked? That skepticism carried over across the entire spectrum of Chinese ADRs. Now that these companies have been around for a few years, that skepticism is starting to fade and investors are more and more open to investing in China.

One such company is today’s Bull of the Day, TAL Education Group (TAL - Free Report) . TAL Education Group, through its subsidiaries, provides K-12 after-school tutoring services in the People's Republic of China. It offers tutoring services to K-12 students covering various academic subjects, including mathematics, physics, chemistry, biology, history, geography, political science, English, and Chinese. The company also provides tutoring services primarily through small classes, including Xueersi Peiyou, Mobby, and Firstleap tutoring services, personalized premium services under Izhikang name, and online courses.

TAL has been a Zacks Rank #1 (Strong Buy) because of the estimate revisions analysts have made on this year and next year’s numbers. Two analysts have increased their estimates for the current year while three analysts have done so for next year’s numbers. The overall effect has increased our Zacks Consensus Estimate from $1.92 to $2.03 for the current year while pushing up next year’s number from $3.00 to $3.44. These numbers represent growth of 56% for the current year, accelerating to 69.18% for next year. It’s important to note that these EPS numbers have not been adjusted for yesterday’s 6 to 1 stock split.

As for the stock chart, TAL has been on fire since a retrace to a bid in late December. From there, the stock has ran up from a split-adjusted $11.02 to $28.97. There was a brief period from late May through early July where shares flirted with the 50-day moving average. Ultimately the momentum kicked back up and the stock pushed on through to new highs. It should come as no coincidence that earnings estimates were continually revised higher as the stock jumped.

If you’re on the sidelines looking in, I’d wait to see if the stock pulled back for a more favorable entry. The 50-day sits well below current price action in the $23 handle but I think a move to the swing low near $27 would be met with a bid.

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