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China Growth Buy: New Oriental Education & Technology (NYSE:EDU)

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New Oriental Education & Technology Group Inc. (NYSE:EDU) is a private education provider based in China. With the huge population in China and the increasing shift of China to becoming a more technology driven nation rather than majority relying on unskilled labor, there will certainly be an increased need for educational services in the country. As such, what value does EDU provide for growth investors? [Trend Analysis]

New Oriental Education & Technology Group Inc. (NYSE:EDU) last traded at $19.84 after moving down -2.75% for the trading day.

EDU is trading with a trailing 12 month P/E multiple of 15.75 and an estimated forward P/E multiple of 13.66. The stock has an estimated 5 year annual growth of 22.83% and a PEG multiple of 0.69.

From a value investor perspective, as mentioned New Oriental Education & Technology Group Inc. trades on an estimated forward P/E multiple of 13.66. The current estimated forward P/E ratio for the market as a whole is approximately 19.82. Therefore, for value investors EDU appears to be underpriced.

For growth investors, who are more interested in growth into the longer term for the stock, we look at the PEG multiple (P/E to growth) of New Oriental Education & Technology Group Inc. (NYSE:EDU). This PEG multiple takes into account the expected long term growth in earnings of New Oriental Education & Technology Group Inc. rather than merely the growth for one full earnings period ahead.

As a rule of thumb, growth investors often believe a stock with a PEG of between 0 and 1 is considered to be underpriced, between 1 and 2 to be at fair value and over 2 to be overpriced. Based on the PEG ratio of EDU being 0.69, we consider New Oriental Education & Technology Group Inc. to likely be underpriced.

The mean analyst 12 month target price for New Oriental Education & Technology Group Inc. (NYSE:EDU) is currently $24.03 or 21.12% above the current price. Additionally, the stock has been as high as $30.41 and as low as $18.10 in the last 52 weeks. Analysts are estimating that EDU will report earnings per share of $0.23 next quarter.