TAL Education Group Net Income dropped on 130% and EBITDA Margin decreased on 9.0 pp from 16.8% to 7.8%
04/28/2020 • About TAL Education Group (
$TAL) • By InTwits
TAL Education Group reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
- TAL Education Group is a fast growth stock: FY2020 revenue growth was 27.7%, 5 year revenue CAGR was 49.8% at FY2020 ROIC 4.0%
- TAL Education Group has medium CAPEX intensity: 5 year average CAPEX/Revenue was 6.1%. At the same time it's in pair with industry average of 5.4%
- CAPEX is quite volatile: $178m in FY2020, $138m in FY2019, $126m in FY2018, $71m in FY2017, $35m in FY2016
- The company has potentially unprofitable business model: ROIC is 4.0%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
TAL Education Group's Revenue surged on 27.7%. Revenue growth showed slowdown in FY20Q4 - it was 18.0% YoY. During FY2016-FY2020 Revenue growth topped in FY2017 at 68.3% and was decelerating since that time. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 4.2 pp from -21.6% to -17.4% in 2020.
Gross Margin increased slightly on 0.57 pp from 54.6% to 55.1% in FY2020. During the last 5 years Gross Margin bottomed in FY2018 at 48.6% and was growing since that time. SG&A as a % of Revenue increased on 8.8 pp from 41.5% to 50.3% in FY2020. During FY2016-FY2020 SG&A as a % of Revenue bottomed in FY2018 at 36.6% and was growing since that time.
Net Income margin dropped on 17.7 pp from 14.3% to -3.4% in FY2020.
Investments (CAPEX, working capital and M&A)
TAL Education Group's CAPEX/Revenue was 5.4% in FY2020. TAL Education Group's CAPEX/Revenue decreased slightly on 1.4 pp from 6.8% in FY2017 to 5.4% in FY2020. It's average CAPEX/Revenue for the last three years was 6.1%. To secure its fast growth the company invested a large share of EBITDA (69.7%) to CAPEX.
Return on investment
The company operates at low but positive ROIC (4.0%) and negative ROE (-4.4%). ROIC dropped on 10.6 pp from 14.6% to 4.0% in FY2020. ROE dropped on 22.3 pp from 17.9% to -4.4% in FY2020. ROE followed a declining trend at -6.7 pp per annum in FY2016-FY2020.
Leverage (Debt)
Company's Net Debt / EBITDA is -1.4x and Debt / EBITDA is 5.9x. Debt jumped on 605% while cash jumped on 50.3%.
TAL Education Group has no short term refinancing risk: cash is higher than short term debt (614.5%).
Management team
TAL Education Group's CEO Zhang Bangxin has spent 10 years with the company. TAL Education Group's CFO Luo Rong has spent 6 years with the company.
Financial and operational results
FY ended 02/29/2020
TAL Education Group ($TAL) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 620 | 1,043 | 1,715 | 2,563 | 3,273 | 27.7% |
| Gross Profit | 316 | 521 | 833 | 1,399 | 1,805 | 29.0% |
| SG&A | 235 | 389 | 628 | 1,064 | 1,648 | 54.9% |
| EBITDA | 104 | 168 | 268 | 430 | 255 | -40.7% |
| Net Income | 103 | 117 | 198 | 367 | -110 | -130.0% |
Balance Sheet
|
|---|
| Cash | 434 | 470 | 712 | 1,247 | 1,874 | 50.3% |
| Short Term Debt | 0 | 0 | 0 | 215 | 305 | 41.6% |
| Long Term Debt | 228 | 450 | 236 | 0 | 1,212 | |
Cash flow
|
|---|
| Capex | 35 | 71 | 126 | 138 | 178 | 28.7% |
Ratios
|
|---|
| Revenue growth | 42.9% | 68.3% | 64.4% | 49.4% | 27.7% | |
| EBITDA growth | 30.8% | 61.3% | 59.3% | 60.7% | -40.7% | |
|
|---|
| Gross Margin | 51.0% | 49.9% | 48.6% | 54.6% | 55.1% | 0.6% |
| EBITDA Margin | 16.8% | 16.1% | 15.6% | 16.8% | 7.8% | -9.0% |
| SG&A, % of revenue | 37.8% | 37.3% | 36.6% | 41.5% | 50.3% | 8.8% |
| Net Income Margin | 16.6% | 11.2% | 11.6% | 14.3% | -3.4% | -17.7% |
| CAPEX, % of revenue | 5.7% | 6.8% | 7.4% | 5.4% | 5.4% | 0.0% |
|
|---|
| ROIC | 13.9% | 14.7% | 13.7% | 14.6% | 4.0% | -10.6% |
| ROE | 27.4% | 21.6% | 17.5% | 17.9% | -4.4% | -22.3% |
| Net Debt/EBITDA | -2.0x | -0.1x | -1.8x | -2.4x | -1.4x | 1.0x |
TAL Education Group ($TAL) key quoterly financial indicators
| mln. $ | FY20Q1 | FY20Q2 | FY20Q3 | FY20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 673 | 913 | 829 | 858 | | 22.3% | 30.5% | 41.5% | 18.0% |
| Net Income | -16 | -24 | 20 | -90 | | -124.2% | -130.6% | -84.2% | -190.4% |
Balance Sheet
|
|---|
| Cash | 1,874 | 1,288 | 2,357 | 1,874 | | 102.7% | 57.2% | 88.1% | 50.3% |
| Short Term Debt | 305 | 263 | 278 | 305 | | - | 7.3% | 13.8% | 41.6% |
| Long Term Debt | 1,212 | 823 | 1,111 | 1,212 | | 414.9% | - | - | - |
Ratios
|
|---|
| Gross Margin | 56.0% | 55.7% | 56.4% | 52.7% | | 3.4% | 2.8% | 2.0% | -5.2% |
| Net Income Margin | -2.4% | -2.6% | 2.4% | -10.5% | | -14.5% | -13.6% | -18.8% | -24.2% |
Peers in Education Services
Below we provide TAL Education Group benchmarking against other companies in Education Services industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
