Critical Comparison: Youdao (NYSE:DAO) & Bright Horizons Family Solutions (NYSE:BFAM)

Bright Horizons Family Solutions (NYSE:BFAM) and Youdao (NYSE:DAO) are both mid-cap consumer discretionary companies, but which is the better investment? We will compare the two companies based on the strength of their earnings, institutional ownership, analyst recommendations, risk, valuation, dividends and profitability.

Analyst Ratings

This is a breakdown of recent ratings for Bright Horizons Family Solutions and Youdao, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Bright Horizons Family Solutions	2	3	4	0	2.22
Youdao	0	1	1	0	2.50

Bright Horizons Family Solutions presently has a consensus price target of $92.00, suggesting a potential upside of 28.87%. Youdao has a consensus price target of $22.00, suggesting a potential upside of 15.21%. Given Bright Horizons Family Solutions’ higher possible upside, analysts clearly believe Bright Horizons Family Solutions is more favorable than Youdao.

Earnings and Valuation

This table compares Bright Horizons Family Solutions and Youdao”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Bright Horizons Family Solutions	$3.03 billion	1.15	$193.12 million	$3.16	22.59
Youdao	$6.01 billion	0.38	$15.35 million	$0.20	95.47

Bright Horizons Family Solutions has higher earnings, but lower revenue than Youdao. Bright Horizons Family Solutions is trading at a lower price-to-earnings ratio than Youdao, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

21.9% of Youdao shares are owned by institutional investors. 1.4% of Bright Horizons Family Solutions shares are owned by company insiders. Comparatively, 43.0% of Youdao shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Profitability

This table compares Bright Horizons Family Solutions and Youdao’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Bright Horizons Family Solutions	5.78%	20.09%	6.35%
Youdao	2.71%	-8.46%	8.78%

Volatility and Risk

Bright Horizons Family Solutions has a beta of 1.18, meaning that its share price is 18% more volatile than the S&P 500. Comparatively, Youdao has a beta of 0.52, meaning that its share price is 48% less volatile than the S&P 500.

Summary

Bright Horizons Family Solutions beats Youdao on 8 of the 14 factors compared between the two stocks.

About Bright Horizons Family Solutions

Bright Horizons Family Solutions Inc. provides early education and childcare, back-up care, educational advisory, and other workplace solutions services for employers and families in the United States, Puerto Rico, the United Kingdom, the Netherlands, Australia, and India. The company operates in three segments: Full Service Center-Based Child Care, Back-Up Care, and Educational Advisory and Other Services. The Full Service Center-Based Child Care segment offers traditional center-based child care and early education, preschool, and elementary education services. The Back-Up Care segment provides center-based back-up child care, in-home child and adult/elder dependent care, school-age camps, virtual tutoring, and self-sourced reimbursed care services through child care centers, school-age campuses, and in-home caregivers, as well as the back-up care network. The Educational Advisory and Other Services segment offers tuition assistance and student loan repayment program administration, workforce education, and related educational consulting services, as well as college admissions and college financial advisory services. The company was formerly known as Bright Horizons Solutions Corp. and changed its name to Bright Horizons Family Solutions Inc. in July 2012. Bright Horizons Family Solutions Inc. was founded in 1986 and is headquartered in Newton, Massachusetts.

About Youdao

Youdao, Inc., an internet technology company, provides online services in the field of content, community, communication, and commerce in China. It operates through three segments: Learning Services, Smart Devices, and Online Marketing Services. The company provides various learning content, applications, and solutions, which cover topics and target people from various age groups for their learning needs through its websites and mobile applications. It offers online knowledge tools, which include Youdao and other dictionaries and translation tools; learning services consisting of tutoring, fee-based premium, and other services; STEAM courses, adult and vocational courses, and other courses, such as China University MOOC; smart devices, such as Youdao Dictionary Pen, Youdao Listening Pod, Youdao Smart light, Youdao Pocket Translator, and Youdao Super Dictionary; education digitalization solutions comprising technologies and solutions licensed to schools or enterprise customers, such as Youdao Smart Learning Terminal, Youdao Sports, and Youdao Smart Cloud; and online marketing services. In addition, the company provides online courses comprising Youdao Premium Courses and NetEase Cloud Classroom, as well as technical support to the variable interest entities (VIEs). Youdao, Inc. was founded in 2006 and is headquartered in Hangzhou, China. Youdao, Inc. is a subsidiary of NetEase, Inc.