New Oriental Education & Technology Group Inc. (NYSE:EDU) Stock Is Going Strong But Fundamentals Look Uncertain: What Lies Ahead ?

New Oriental Education & Technology Group’s (NYSE:EDU) stock is up by a considerable 12% over the past three months. But the company’s key financial indicators appear to be differing across the board and that makes us question whether or not the company’s current share price momentum can be maintained. In this article, we decided to focus on New Oriental Education & Technology Group’s ROE.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. In simpler terms, it measures the profitability of a company in relation to shareholder’s equity.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part – they are all under $10bn in marketcap – there is still time to get in early.

Return on equity can be calculated by using the formula:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity

So, based on the above formula, the ROE for New Oriental Education & Technology Group is:

9.9% = US$393m ÷ US$4.0b (Based on the trailing twelve months to February 2025).

The ‘return’ is the yearly profit. Another way to think of that is that for every $1 worth of equity, the company was able to earn $0.10 in profit.

Check out our latest analysis for New Oriental Education & Technology Group

So far, we’ve learned that ROE is a measure of a company’s profitability. We now need to evaluate how much profit the company reinvests or “retains” for future growth which then gives us an idea about the growth potential of the company. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes.

When you first look at it, New Oriental Education & Technology Group’s ROE doesn’t look that attractive. We then compared the company’s ROE to the broader industry and were disappointed to see that the ROE is lower than the industry average of 15%. Thus, the low net income growth of 4.9% seen by New Oriental Education & Technology Group over the past five years could probably be the result of the low ROE.

As a next step, we compared New Oriental Education & Technology Group’s net income growth with the industry and were disappointed to see that the company’s growth is lower than the industry average growth of 26% in the same period.