TAL Education Earnings: Raising Fair Value Estimate on Higher Growth, but Shares Still Expensive

We raise our fair value estimate for TAL Education to USD 9.70 from USD 7.70 following its fiscal 2024 (ending February 2024) results that beat our expectation as the content solutions segment revenue tripled in the February quarter. Overall, TAL remained loss-making in fiscal 2024, but its net loss narrowed to USD 4 million, and we expect the company to be profitable going forward. We increase our revenue assumption by 14%-29% for fiscal 2025 through 2028 to reflect the strong momentum, but we are less optimistic than the market. We think TAL’s current valuation has priced in a 25% revenue CAGR over the next five years with a 15% adjusted operating margin by fiscal 2029, much higher than our forecast of a 19% revenue CAGR and a 10% adjusted operating margin. For fiscal 2025, we project 33% revenue growth and 3.5% adjusted operating margin.