On Aug 17, Zacks Investment Research upgraded Beijing based provider of computer-based testing and testing-related services, ATA Inc. (ATAI) to a Zacks Rank #1 (Strong Buy), following solid first quarter 2014 results released on Aug 9.
Why the Upgrade?
One of the leading providers of computer-based testing services in China, ATA surpassed the Zacks Consensus Estimate on both counts in the first quarter of 2014. The company’s earnings of 6 cents surpassed the Zacks Consensus Estimate of 2 cents by 200% and the prior-year quarter level by 50.0% on the back of solid revenue increase and gross profit expansion.
Revenues of $15.0 million beat the Zacks Consensus Estimate of $13.0 million by 12.8% in first quarter 2014. Revenues were up 4.3% year over year on the back of volume growth of billable tests, like CBA exam, and TOEIC and HR Select exams. Gross profit grew 2.8% in the quarter to $3.3 million.
ATAI operates one of the largest authorized test centers throughout China. These testing services allow students to obtain professional recognition. With a large number of students qualifying in China, ATA believes there will be a growing demand for its testing services in the upcoming quarters.
For fiscal 2014, the company expects net revenue to range between $65.66 million and $68.92 million, compared to $59.7 million in the prior year. Adjusted net income is likely to be in the range of $6.02 million to $7.65 million compared to $5.9 million in the prior year.
Other Stocks to Consider
Other education companies that are performing well include Capella Education Company (CPLA), Grand Canyon Education, Inc. (LOPE) and TAL Education Group (XRS). Capella carries a Zacks Rank #1 (Strong Buy), while Grand Canyon and TAL Education carry a Zacks Rank #2 (Buy).
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