Critical Comparison: TAL Education Group (NYSE:TAL) & Gaotu Techedu (NYSE:GOTU)

Gaotu Techedu (NYSE:GOTU) and TAL Education Group (NYSE:TAL) are both consumer discretionary companies, but which is the superior business? We will compare the two businesses based on the strength of their institutional ownership, risk, analyst recommendations, earnings, valuation, profitability and dividends.

Profitability

This table compares Gaotu Techedu and TAL Education Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Gaotu Techedu	-5.00%	-26.89%	-5.73%
TAL Education Group	22.13%	18.96%	11.64%

Institutional & Insider Ownership

48.4% of Gaotu Techedu shares are owned by institutional investors. Comparatively, 37.8% of TAL Education Group shares are owned by institutional investors. 44.9% of Gaotu Techedu shares are owned by insiders. Comparatively, 1.8% of TAL Education Group shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Gaotu Techedu and TAL Education Group, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Gaotu Techedu	1	0	0	0	1.00
TAL Education Group	0	2	1	1	2.75

TAL Education Group has a consensus target price of $15.05, indicating a potential upside of 48.51%. Given TAL Education Group’s stronger consensus rating and higher possible upside, analysts clearly believe TAL Education Group is more favorable than Gaotu Techedu.

Valuation and Earnings

This table compares Gaotu Techedu and TAL Education Group”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Gaotu Techedu	$878.98 million	0.67	-$46.23 million	($0.21)	-11.83
TAL Education Group	$3.01 billion	1.87	$530.75 million	$1.31	7.74

TAL Education Group has higher revenue and earnings than Gaotu Techedu. Gaotu Techedu is trading at a lower price-to-earnings ratio than TAL Education Group, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Gaotu Techedu has a beta of 0.81, meaning that its share price is 19% less volatile than the S&P 500. Comparatively, TAL Education Group has a beta of 0.22, meaning that its share price is 78% less volatile than the S&P 500.

Summary

TAL Education Group beats Gaotu Techedu on 12 of the 15 factors compared between the two stocks.

About Gaotu Techedu

Gaotu Techedu Inc. is a China-based online education company that provides courses and learning services through digital platforms. Its offerings include academic tutoring for school-age students, test preparation, and education for adult and vocational learners. The company was founded in 2014 as GSX Techedu and adopted the Gaotu name in 2021. It serves learners primarily in China, using online instruction and related learning tools to deliver its courses. Gaotu was founded by Chen Xiangdong, who has served as the company’s chairman and chief executive officer.

About TAL Education Group

TAL Education Group is a China-based education and technology company that provides learning services, educational content and related technology products. Its offerings include learning programs and digital resources for students, as well as smart learning devices and solutions for families and schools. Founded in 2003 as Xueersi, the company later adopted the name TAL Education Group. Following changes to China’s regulation of compulsory-education tutoring, TAL shifted its business toward services and products such as non-academic learning programs, educational technology and learning materials.