Reviewing Gaotu Techedu (NYSE:GOTU) & RISE Education Cayman (NASDAQ:REDU)

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

Profitability

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

Net Margins Return on Equity Return on Assets
RISE Education Cayman -4.59% 4.77% 0.91%
Gaotu Techedu -38.72% -96.40% -42.05%

Institutional and Insider Ownership

7.7% of RISE Education Cayman shares are owned by institutional investors. Comparatively, 35.9% of Gaotu Techedu shares are owned by institutional investors. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Analyst Recommendations

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

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
RISE Education Cayman 0 1 0 0 2.00
Gaotu Techedu 4 2 0 0 1.33

RISE Education Cayman currently has a consensus price target of $2.90, suggesting a potential upside of 271.79%. Gaotu Techedu has a consensus price target of $8.16, suggesting a potential upside of 221.26%. Given RISE Education Cayman’s stronger consensus rating and higher possible upside, equities analysts plainly believe RISE Education Cayman is more favorable than Gaotu Techedu.

Valuation and Earnings

This table compares RISE Education Cayman and Gaotu Techedu’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
RISE Education Cayman $146.89 million 0.30 -$20.30 million ($0.16) -4.88
Gaotu Techedu $1.09 billion 0.59 -$213.47 million ($0.89) -2.85

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

Risk and Volatility

RISE Education Cayman has a beta of 1.21, meaning that its stock price is 21% more volatile than the S&P 500. Comparatively, Gaotu Techedu has a beta of -1.29, meaning that its stock price is 229% less volatile than the S&P 500.

Summary

RISE Education Cayman beats Gaotu Techedu on 8 of the 11 factors compared between the two stocks.

RISE Education Cayman Company Profile

RISE Education Cayman Ltd. engages in the provision of after-school English teaching and tutoring services. It offers various subject matters, such as language arts, math, natural science, and social science. The company was founded in October 2007 and is headquartered in Dongcheng, China.

Gaotu Techedu Company Profile

Gaotu Techedu, Inc. is a technology-driven education company. Its core expertise is in online K-12 courses, and online K-12 large-class after-school tutoring service provider in China. The company’s K-12 courses cover all primary and secondary grades. It also offers foreign language, professional and interest courses. The company was founded by Xiang Dong Chen in June 2014 and is headquartered in Beijing, China.

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