TAL Education Group (TAL): what the price assumes

Generated: 2026-08-08 · Source: https://boothcheck.com/report/TAL

Headline

Field	Value
Ticker	TAL
Company	TAL Education Group
Sector / Industry	Consumer Cyclical
Current price	$12.12/sh
Composition	Learning services and others 65% / Learning content solutions 35%

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Field	Value
Inversion basis	whole-company
Operating margin (value-band context)	1.5%
Operating margin today	9.2%
Margin compression (value-band)	-7.7pp
Implied growth	15.1%
Multiple paid	20x operating income

The operating-margin figure is value-band context at year 5: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 9% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7pp.

How unusual the bet is: within-range

Reference	Value
vs own history	-0.19σ
sustained it ~5 years at this level	44%
implied end-window share	0%

Valuation X-Ray

The price is supported by asset-based and earnings-power and relative-multiple value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Family	Median price/FV	Models	Reads
Asset	1.04x	5	expensive
Earnings	1.12x	3	expensive
Relative	1.15x	2	expensive
Growth	—	0	—

Families that justify the price: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.7%); the inversion above states its own rate.

Per-Model Detail (n=10)

Model	Family	FV	Price/FV	Applicable	Methodology
DCF Perpetual Growth	Growth	$27.29	0.44x	no	FCF base $0.5B, growth 14% (input: historical growth), terminal g 4.0%, WACC 8.7%, 6yr projection
DCF Exit Multiple	Growth	$17.70	0.68x	no	Exit EV/EBITDA: 16.2x / 18.2x / 20.2x (bear / base = today's held flat / bull), 6yr
Relative Valuation	Relative	$14.13	0.86x	yes	P/E 18x (static sector reference · 2026-04), scenarios: 14.9x / 18.0x / 21.1x (bear / base = reference held flat / bull), EV/EBITDA 13.86x
Simple DDM	Growth	—	—	no	—
Two-Stage DDM	Growth	—	—	no	—
Simple Excess Return	Asset	$9.91	1.22x	yes	BV/sh $6.52, ROE (TTM) 14.1%, ke 9.3%
Two-Stage Excess Return	Asset	$12.09	1.00x	yes	5yr excess ROE then converge to ke=9.3%
Discounted Future Market Cap	Growth	$11.57	1.05x	no	Rev $3.0B, growth 14% (input: historical growth; tapered), Terminal P/S: 1.9x / 2.3x / 2.7x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair Value	Relative	$11.00	1.10x	no	EPS $0.92, growth 2% (input: historical EPS growth), PEG=6.61 (Overvalued)
Margin Trajectory	Growth	—	—	no	—
Earnings Power Value	Earnings	—	—	no	—
Residual Income	Asset	$12.49	0.97x	yes	BV $6.52 + 5yr PV of (ROE (TTM) 14.1% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham Number	Asset	$11.60	1.04x	yes	√(22.5 × EPS $0.92 × BVPS $6.52) — Graham's conservative floor
EV/EBITDA Relative	Relative	$8.43	1.44x	yes	EBITDA $0.34B × sector EV/EBITDA 12.0x
FCF Yield	Earnings	$10.77	1.12x	yes	FCF $508.3M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF Yield	Earnings	$9.97	1.22x	yes	SBC-adj FCF $0.47B (FCF $0.51B − SBC $0.04B) capitalized at Kₑ
Ben Graham Formula	Earnings	$29.58	0.41x	yes	EPS $0.92 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/B	Asset	$5.38	2.25x	yes	BV $6.52 × (ROIC 7.2% / WACC 8.7%)
P/Sales Sector	Relative	$13.00	0.93x	no	Revenue $3.01B × sector P/S 2.5x
PEG Fair Value	Relative	$34.38	0.35x	no	EPS $0.92 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings Yield	Earnings	$9.91	1.22x	no	EPS $0.92 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations Multiple	Relative	—	—	no	—
Clinical Phase NPV	Growth	—	—	no	—
Merton	Asset	—	—	no	—
V5 Mechanical	—	—	—	no	—

Economic-Unit Decomposition (Sum Of The Parts)

Only one reportable economic unit is present in the current topology source. Consolidated operating lenses remain available, but there is no multi-unit decomposition.

Unit	Role	Valuation basis	Revenue	Reported profit	Value evidence	Status
Exercisable as of February 28, 2026	operating	enterprise	0.0B reported-currency	—	withheld	unresolved no unit value

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Field	Value
Net cash	$3.2b
Net debt / NOPAT (after-tax)	-14.85x (net cash)
Net debt / operating income (pre-tax)	-11.74x (net cash)
Share count CAGR (buyback)	-2.7%
Burning cash	no

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• The courseware and device line, which the company calls learning content solutions, grew 48.4% to $1,061.9 million in the year to February 2026 and now supplies about a third of revenue.
• Holders own a Cayman holding company with contractual claims on the mainland schools rather than shares in them, a structure the annual report describes in exactly those terms.
• Operating profit is one year old, so the year ending February 2027 is the first real test of whether the 9.2% margin just reached is a level or a peak.

Bull Case

Three fiscal years carry this argument better than any description of the business. In the year to February 2024 the operating line ran a $69.2 million loss. The next year it landed within a rounding error of breakeven, a $3.2 million loss. In the year to February 2026 it produced $276.0 million of operating profit. The revenue underneath moved the same way, and the filing states it plainly: "Our net revenues increased from $1,490.4 million in the fiscal year ended February 29, 2024 to $2,250.2 million in the fiscal year ended February 28, 2025, and further increased to $3,008.9 million in the fiscal year ended February 28, 2026".

Nothing about the cost base got smaller. Revenue simply outran it. Selling and marketing expenses rose 18.7% to $889.1 million in the year to February 2026, against revenue growth of about 34%. That gap is the whole mechanism: the company is spending a shrinking share of each new dollar on winning the customer who brings it. Operating expenses fell from 53.4% of revenue to 46.2% across those two years. When a business with heavy fixed teaching capacity fills that capacity, the incremental margin is very high, and that is what the last twelve months look like.

The faster half of the mix is also the lighter one. "Revenues from learning content solutions increased by 48.4% to $1,061.9 million for the fiscal year ended February 28, 2026", roughly a third of the total and growing about half again as fast as the company overall. Learning content solutions sells products, courseware and devices. It does not need another building or another teacher in another city to serve the next buyer. The classroom side grew too, and the filing attributes it to "the year-over-year enrollment growth of Xueersi Peiyou as a result of the expansion of our capacity", which is the harder, more capital-hungry kind of growth. Having both is better than having either.

The profit turned into money, which is not automatic. Operating activities generated 601.5 million dollars in the year to February 2026, up from 397.9 million and 306.2 million in the two preceding years. Some of that has gone back to holders. On July 28, 2025 the board authorised a new repurchase plan of up to 600 million dollars of common shares, the latest in a sequence running since April 2021. The share count has fallen about 2.7% a year since February 2022, which is buyback deployment showing up where it cannot be dressed up.

Set against listed education peers, the margin is the bull case rather than the objection. LRN earns a 15.8% operating margin on $2,535.7 million of revenue and LAUR earns 24.4% on $1,830.1 million, while this business earns 9.2%. One reading is that education in China is structurally thinner. The other is that a company one year past breakeven has not yet reached the margin its industry demonstrably supports, and that the two years of losses behind it are the reason the current figure looks modest rather than evidence of a ceiling.

Bear Case

For part of what this company sells, the price is not a commercial decision. Chinese rules place fees for compulsory-subject tutoring under state supervision: "fees charged for academic subjects tutoring in compulsory education shall be included into government-guided price management", alongside a separate prohibition under which "the provision of overseas education courses by PRC after-school tutoring institutions is strictly prohibited". That is not a risk factor filed at the back of the document out of caution. It is a standing claim by the state on the revenue line.

The company does not treat the question as settled either. It writes that "We have been closely monitoring the evolving regulatory environment and are making efforts to seek guidance from and cooperate with the government authorities" on compliance with the compulsory-education burden rules. A business still asking the regulator what it is allowed to sell is a business whose forward revenue is a policy variable first and an execution question second. The 2021 rewrite of that policy is the precedent, and it is described in the same filing: online tutoring institutions were told to "suspend enrollment of students and charging fees" until they held the required permit.

Then there is what a share actually is. The operating schools sit inside contractual structures, and the annual report is unusually direct about the consequence: "neither TAL Education Group nor its investors have an equity ownership in, direct foreign investment in, or control through such ownership or investment of, the VIEs". Economic benefit reaches the listed company because "we rely on the performance by the VIEs and their respective equity holders of their obligations under the contracts". Every valuation method applied here quietly assumes those contracts hold and remain enforceable. That assumption has no market price attached to it, which is not the same as it being free.

Against that backdrop, look at what today's level requires. The market is capitalising the operating profit of the year to February 2026 at roughly twenty times, and that embeds operating profit compounding around 15% a year across a five-year stretch. The rate itself is not the stretch. Revenue grew about 34% last year and about 51% the year before, and the company's own multi-year growth average sits above the required pace. The stretch is persistence. Of comparable fast growers, only about 44% held that kind of pace over a similar stretch, and this particular one has produced exactly one profitable year against two loss-making ones. If growth fades toward the education sector's ordinary pace, there is no discount to absorb it: the peer-multiple comparisons already sit about 15% under the price, and the asset-value methods about 4% under.

Concentration compounds it. The filing warns that "We derive a significant portion of our revenues from a limited number of cities", which means a municipal policy decision, not only a national one, can move the number. The balance sheet does bound the downside, though it is worth being precise about what is in it: holdings of cash and short-term investments totalled 3,239.3 million dollars at February 28, 2026, a large part of it wealth-management products rather than operating assets, and a further 555.8 million dollars sits in equity stakes held outside the operating business. That floor is real. It is also the reason the reported bottom line flatters the schools, a point the valuation section takes up.

Valuation

Strip the story out and the arithmetic is short. Enterprise value works out to roughly twenty times the operating profit earned in the year to February 2026, and inverting that at a 9% cost of capital with 4% long-run growth gives operating profit compounding around 15% a year over a five-year stretch. That is the bet in one sentence. It is worth holding lightly: this is a single solve, and moving the cost of capital by one percentage point moves the implied growth by about seven points, so the figure describes a shape rather than a measurement.

What makes the setup unusual is how tightly the methods agree. The price sits about 4% above where the asset-value methods land, about 12% above the earnings-power methods, and about 15% above the peer-multiple comparisons. No family is far away in either direction. Companies whose price depends on a story do not look like this; the gap between the methods and the market is normally measured in multiples, not in low double-digit percentages. Within the earnings-power group, the least demanding method is worth naming: capitalising last year's free cash flow at the cost of equity with no growth assumed at all still reaches within about 12% of today's level. The forward-growth methods do not appear in that comparison, because a three-year record containing two operating losses gives a projection method nothing stable to project from.

So the concrete requirement is modest by the company's recent standards and severe by its longer record. About 15% a year in operating profit, sustained, is well under the roughly 34% revenue growth just delivered and under the company's own multi-year average. Against the three prior fiscal years it is a different proposition, since two of them produced operating losses. The margin is the pivot. The business earned 9.2% at the operating line in the year to February 2026, and among listed education peers LRN sits at 15.8% and STRA at 14.0%. Closing part of that distance is what the required growth mostly consists of, and it does not require the top-line pace to continue.

One number deserves care before it is used as an anchor. Holdings of cash and short-term investments totalled 3,239.3 million dollars at the year end against a market value near seven billion dollars. A meaningful share of the reported bottom line is therefore the yield on that portfolio rather than the output of the schools. An investor anchoring on net income is valuing a tutoring business and an investment fund together and calling the total one multiple.

Capital deployment says something about how management reads its own position. Payments for long-term investments were $406.8 million in the year to February 2026 against $101.8 million the year before, while the repurchase authorisation runs to 600 million dollars. Money is flowing to securities and to buybacks at a similar order of magnitude to what the operating business earned. That is a rational posture for a company whose reinvestment opportunity is capped by regulation, and it is also a quiet statement about how much operating growth management believes it can buy with its own money.

Catalysts

The annual report for the fiscal year ended February 28, 2026 was filed on June 12, 2026. It is the first one covering a full year of operating profit, and it sets the base every subsequent comparison runs against: $3,008.9 million of revenue and $276.0 million of operating profit. The next fiscal year closes on February 28, 2027, with the annual report following in the middle of that year, so the reporting calendar puts a long gap between confirmations. For a company whose profit history is one year long, that gap matters more than it would for a mature filer.

Capital return has its own dated schedule. The repurchase programme launched in April 2021 was extended by twelve months on April 22, 2025 and ran through April 30, 2026, and on July 28, 2025 the board authorised a separate new plan permitting repurchases of up to 600 million dollars of common shares. Those two authorisations overlap, which is why the share count has been falling steadily rather than in one visible block. The live question is the pace of use rather than the existence of the authority.

The regulatory calendar is the one that cannot be scheduled. The company describes itself as still seeking guidance from PRC authorities on compliance with the compulsory-education burden rules. Guidance of that kind arrives when it arrives, and the 2021 precedent is that it can land between reporting periods and change what a business is permitted to sell before the next set of accounts is drawn.

Peer Cohorts (Per Segment, With Filing Citations)

Exercisable as of February 28, 2026 (reported)

• EDU (NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC.)
• FY2025 20-F: 0.53 and the estimated fair value of the share options granted was US$ 21,613 on March 7, 2019. The exercise period is 6 years from the listing date of East Buy and the exercise price is US$ 1.13 . F- 4 9 Table of Contents The movements of share options under the Pre-IPO Share Option Scheme are summarized as follows:…
• FY2025 20-F: 6 Share Incentive Plan, excluding non-vested equity shares that were forfeited or cancelled after the relevant grant date. The following paragraphs describe the principal terms of the 2016 plan. Amendment of the Plan . Our board of director may at any time amend, suspend or terminate the 2016 plan. Unless we decide to…
• LRN (Stride, Inc.)
• FY2025 10-K: …the amended and restated 2016 Plan to October 7, 2032, an increase to the limit on the number of shares that may be issued upon the exercise of incentive stock options, and a prohibition on the payment of dividends and dividend equivalents on unvested awards. ​ The amended and restated 2016 Plan is designed to…
• FY2025 10-K: ​ ​ - ​ - ​ ​ - ​ ​ 21,419 Exercise of stock options 1,350 ​ ​ - ​ ​ 20 ​ ​ - ​ ​ - ​ - ​ ​ - ​ ​ 20 Vesting of performance share units, net of tax withholding 80,004 ​ ​ - ​ ​ - ​ ​ - ​ ​ - ​ - ​ ​ - ​ - Issuance of restricted stock awards 595,818 ​ ​ - ​ ​ - ​ ​ - ​ ​ - ​ - ​ ​ - ​ ​ - Forfeiture of restricted stock…
• STRA (Strategic Education, Inc.)
• FY2025 10-K: …of certain conditions, to increase 70 Table of Contents the commitments under the Revolving Credit Facility or establish one or more incremental term loans (each, an "Incremental Facility") in an amount up to the sum of (x) the greater of (A) $300 million and (B) 100% of the Company's consolidated EBITDA (earnings…
• FY2025 10-K: , 2025) . 21.1* Subsidiaries of Registrant. 23.1* Consent of PricewaterhouseCoopers LLP. 23.2* Consent of Deloitte & Touche LLP. 24.1* Power of Attorney (included in signature page hereto). 31.1* Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Act. 31.2* Certification of Chief…
• LAUR (Laureate Education, Inc.)
• FY2025 10-K: …date of issuance of this report. Our primary source of cash is revenue from tuition charged to students in connection with our various education program offerings. Essentially all of our revenues are generated from private pay sources as there are no material government-sponsored loan programs in Mexico or Peru. We…
• FY2025 10-K: …2013 Long-Term Incentive Plan On June 19, 2017, the Board approved, subject to stockholder approval, an amendment and restatement of the 2013 Plan. Among other things, the amendment (i) increases the number of shares of common stock that may be issued pursuant to awards under the 2013 Plan to 14,714 ; (ii) adds…
• GHC (GRAHAM HOLDINGS CO)
• FY2025 10-K: 9.90 End of Year, unvested 24,396 708.93 For the share awards outstanding at December 31, 2025, the aforementioned restriction is expected to lapse in 2027 for 14,617 shares and 2029 for 9,779 shares. Also, early in 2026, the Company issued stock awards of 172 shares. Stock-based compensation costs resulting from…
• FY2025 10-K: …Company starting in 2029 and ending in 2032. The minority shareholder at Clarus may put all or a portion of their shares to the Company. The first put period occurred in 2025; a second put period will occur in 2026; and a final put period will occur in 2030. In October 2025, the Company purchased some of the…
• AFYA (AFYA LIMITED)
• FY2025 20-F: …Tabular Disclosure of Contractual Obligations The following is a summary of our contractual obligations, based on contractual undiscounted amounts, as of December 31, 2025: Payments Due by Period as of December 31, 2025 Less than 1 year 1 - 3 years 3 - 5 years More than 5 years Total (in R$ thousands) Trade payables…
• FY2025 20-F: , 2025 and 2024: F- 27 Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated Schedule of present assets and liabilities information for the company operating segments As of December 31, 2025 Undergraduate Continuing education Medical practice…
• CVSA (Covista Inc.)
• FY2025 10-K: …year 2023, we granted stock options generally with a four-year graded vesting from the grant date and expire ten years from the grant date. The following table summarizes stock option activity for the year ended June 30, 2025: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average ​ ​ ​ ​ Number of ​ ​ ​ Remaining ​…
• FY2025 10-K: 2028Member 2024-06-30 0000730464 srt:MinimumMember us-gaap:RevolvingCreditFacilityMember us-gaap:SubsequentEventMember us-gaap:SecuredOvernightFinancingRateSofrMember 2025-08-06 2025-08-06 0000730464 srt:MinimumMember us-gaap:RevolvingCreditFacilityMember us-gaap:SubsequentEventMember atge:AlternateBaseRateMember…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

FY2026 20-F consolidated statements of operations · FY2026 20-F consolidated statements of cash flows · FY2026 20-F · FY2026 20-F, filed June 12, 2026 · FY2026 20-F, risk factors