TAL Education Group (NYSE:TAL) stock continues its recent momentum, rising 28% in the last month alone. The annual increase rate in the past 30 days reached 83%.
After such a large price increase, when almost half of the companies in the U.S. consumer services industry have price-to-sales (P/S) ratios below 1.4x, you might consider TAL Education Group as a stock. Probably. With a P/S ratio of 6.5x, it's not worth studying. However, there may be an explanation as to why P/S is so lofty, so it would be unwise to take it at face value.
Check out our latest analysis for TAL Education Group.
TAL Education Group's achievements
Things haven't been great for TAL Education Group lately, as its revenue has been growing slower than most other companies. One possibility is that the P/S ratio is high because investors think this lackluster earnings performance will improve markedly. If you don't hope so, you will end up paying a very high price for no particular reason.
If you want to know what analysts are predicting for the future, check out this article. free This is a report from the TAL Education Group.
What do earnings growth metrics indicate about high P/S?
To justify TAL Education Group's P/S ratio, it would need to achieve outstanding growth that significantly outpaces its industry.
Looking back, the company's revenue grew 2.9% in the last year. Still, earnings are down a total of 67% compared to his three years ago, which is disappointing. So, unfortunately, we have to admit that the company hasn't done much to grow its revenue over that time.
Looking to the future, the analysts covering the company estimate that its revenue should grow 19% per year over the next three years. Meanwhile, the rest of the industry is expected to grow only 12% annually, making it significantly less attractive.
With this in mind, it's understandable that TAL Education Group's P&L is higher than most other companies. Apparently shareholders aren't keen on parting with something that could have a richer future ahead of it.
What does TAL Education Group's P/S mean for investors?
TAL Education Group's stock price has increased significantly recently, which has contributed significantly to boosting the company's P/S number. While we typically caution against reading too much into price-to-sales ratios when making investment decisions, they can reveal a lot about what other market participants think about a company. .
As we expected, a check of analyst forecasts for TAL Education Group reveals that its strong earnings outlook is contributing to its strong P/S. At this stage, investors feel that the possibility of earnings deterioration is quite remote, and an increase in the P/S ratio is justified. Unless the analysts really miss the mark, these strong earnings forecasts should keep the stock in good shape.
A company's balance sheet is another important area of ​​risk analysis.our free Analyze TAL Education Group's balance sheet with 6 simple checks to uncover potentially troubling risks.
A company with a history of solid revenue growth will meet your needs.you might want to see this free A collection of other companies with high earnings growth and low P/E ratios.
Valuation is complex, but we help make it simple.
Check out our comprehensive analysis, including below, to see if TAL Education Group is potentially overvalued or undervalued. Fair value estimates, risks and caveats, dividends, insider trading, and financial health.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.