New Oriental Education Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Chinese education company New Oriental Education & Technology (NYS: EDU) sank 11% today after the company's current-quarter revenue outlook missed Wall Street expectations.

So what: While New Oriental's second-quarter results -- EPS of $0.02 on revenue of $132 million -- were in line with estimates, management's current-quarter guidance is prompting analysts to lower their growth expectations yet again. For the third quarter, the company now expects year-over-year revenue to be up about 27%-33%. It's solid, to be sure, but given New Oriental's relatively lofty valuation, it wasn't quite enough to satisfy Wall Street's voracious growth appetite.

Now what: Patient Fools should look into this plunge as a possible entry point. While the company isn't growing as fast as Wall Street would like, Chairman and CEO Michael Yu assured investors that he is "hopeful of a strong rebound" in the latter half of the year. When you consider New Oriental's strong returns on equity, debtless balance sheet, and slumping stock price, betting on that optimism might be a smart move.

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At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of New Oriental Education. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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