Analysis of NED:
A cut and paste from a Google Finance chat room:
Data from http://money.cnn.com/news/newsfeeds/articles/prnewswire/CNM0241911200...
and
http://finance.google.com/finance?fstype=ii&q=NYSE:NED
On a per share level:
Diluted EPS Excluding Extraordinary Items (RMB)
Q1 08: 1.50
Q4 07: -0.45
Q3 07: 0.71
Q2 07: 0.13
Q1 07: 0.87
Q1 08 EPS is 72% higher than Q1 07.
Trailing EPS for Fiscal 07 = RMB 1.26.
(This ties with google finance's EPS of $0.17, assuming RMB/USD of
7.4/1)
Trailing EPS YTD for the year ended 9/30/07 = RMB 1.89 ($0.25)
This represents a growth of 47%.
Q1 08 vs Q1 07 represents a 72% increase, year on year.
On a company level, "Net income increased by 39.4% year-over-year to
RMB44.5 million (US$5.9 million) from RMB31.9 million in the first
quarter of fiscal year 2007".
So we have three measures of income growth, ranging from 39.4% to 72%.
Lets take the most conservative figure of 39.4%, and chop off an
arbitrary 9.4% as our new ultra-conservative growth rate for 2008,
giving us 30% growth.
At the current price of $7.38, trailing P/E = 29.52
Divide this by our conservative growth rate of 30%, and you have a PEG
of less than 1. For a Chinese growth stock.
Reuters classifies NED as a "school" for industry comparison purposes.
The average P/E for the industry is 38x. At this P/E, NED should be
trading at 9.5.
P/E for EDU, which is also a "school" on Reuters, is 68x. The growth
rate for NED, which is a company based on digital learning, where
ramping up sales will not be limited by the speed of construction of
physical schools and hiring qualified teachers, should be higher than
EDU's, which is based on teaching at physical schools. At EDU's P/E,
NED should be trading at $17.
The company seems confident, and has indicated the following:
"We are very pleased with the results of the first quarter of our
fiscal year 2008," said Mr. Dong Xu, Noah's Chairman and Chief
Executive Officer.""
"Noah expects its total net revenues of fiscal year 2008 (July 1, 2007
to June 30, 2008) to be in the range of RMB720 million (US$96 million)
to RMB730 million (US$97 million), representing year-over-year growth
in the range of 30% to 32%, respectively."
On a broader level, I live in Shanghai, where you regularly get
gridlock outside schools because anxious parents park on the sidewalks
and streets in wait for their prince or princess to get off school.
Because of a ton of factors, including the 1 child policy, Chinese
culture that emphasizes education, and obviously growth in disposable
income, the market for NED's educational devices is huge and will
continue to grow.
Not sure what is going on with the recent sell-offs, but it seems that
fundamentally, NED is undervalued by quite a bit.
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