Our trade recommendation on Four Seasons (USA Stocks:FEDU) based on the newest fundamentals

Every cloud has a silver lining, and this could be the case for Four Seasons Education, a player in the Education & Training Services industry. Despite the company's net income from continuing operations recording a loss of 33.5M, it boasts a robust cash position with cash and equivalents standing at a whopping 508.43M. However, the company's probability of bankruptcy stands at a concerning 29.64%, which could be a red flag for potential investors. With a price to sales ratio of 0.19X, the stock seems undervalued, but is it still a viable investment opportunity? Let's delve deeper into the fundamentals of this Diversified Consumer Services provider. At present, the Sales per Share of Four Seasons Education is relatively stable compared to the previous year. The company's Total Debt is projected to increase to approximately $3.8 million in 2023, while its Enterprise Value is expected to decrease to $23.9 million in the same year. Four Seasons Education is set to announce its earnings today. While many fundamental traders may be overly focused on scrutinizing balance sheets and income statements, it is sensible to evaluate Four Seasons Education in terms of its basic efficiency ratios. The question for December is: what exactly are Four Seasons' shareholders gaining? Will private investors maintain their holdings, or should we anticipate a sell-off?
Published over three months ago
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Reviewed by Raphi Shpitalnik

Four Seasons Education is currently overvalued at $7.88 per share, given the modest future projections. Four Seasons Education has a Sharpe Ratio, or Efficiency, of -0.0334. This indicates that the company has experienced a -0.0334% return per unit of risk over the past three months. Our approach to predicting the risk of any stock involves examining both systematic and unsystematic factors of the business, including all available market data and technical indicators. Four Seasons Education reveals twenty-one different technical indicators, which can assist in evaluating the volatility inherent in its stock price that cannot be diversified away. Please verify Four Seasons Education's Coefficient Of Variation of 34181.04, downside deviation of 5.21, and Mean Deviation of 1.73 to validate the risk estimate we provide.

Main Ideas

Four Seasons Education, a player in the Education & Training Services industry, presents a mixed bag from a fundamental perspective. On the positive side, the company has a strong balance sheet with a net asset value of 601.04M and cash and equivalents totaling 508.43M, providing a solid financial cushion. However, the company reported a significant loss before tax of 32.5M, indicating operational challenges. Furthermore, the company's price to book ratio stands at a low 0.26X, suggesting that the market may be undervaluing the company's assets. Despite these challenges, with a target price of 4.37, there may still be potential for investment returns.
Typically, a company's financial statements are the reports that show the financial position of the company. There are three main documents that fall into the category of financial statements. These documents include Four Seasons income statement, its balance sheet, and the statement of cash flows. Potential Four Seasons investors and stakeholders use financial statements to determine how well the company is positioned to perform in the future. Although Four Seasons investors may use each financial statement separately, they are all related. The changes in Four Seasons's assets and liabilities, for example, are also reflected in the revenues and expenses that we see on Four Seasons's income statement, which results in the company's gains or losses. Cash flows can provide more information regarding cash listed on a balance sheet, but not equivalent to net income shown on the income statement. Please read more on our technical analysis and fundamental analysis pages.
The goal of Four Seasons fundamental analysis is to do accurate financial forecasts. There are several possible objectives to fundamental analysis, such as projecting of Four Seasons performance into the future periods or doing a reasonable stock valuation. The intrinsic value of Four Seasons shares is the value that is considered the true value of the share. If the intrinsic value of Four is higher than its market price, buying is generally recommended. If it is equal to the market price, it is recommended to hold; and if it is less than the market price, then one should sell all shares Four Seasons. Please read more on our fundamental analysis page.

How effective is Four Seasons in utilizing its assets?

Four Seasons Education reports assets on its Balance Sheet. It represents the amount of Four resources that either has an existing economic value or will provide some form of benefits in the future. By effectively utilizing its assets, Four Seasons aims to generate revenue, control costs, drive operational efficiency, and enhance profitability. Optimizing asset utilization helps maximize shareholder value and maintain a competitive position in the Diversified Consumer Services space. To get a better handle on how balance sheet or income statements item affect Four volatility, please check the breakdown of all its fundamentals.

Are Four Seasons Earnings Expected to grow?

The future earnings power of Four Seasons involves the interaction of many company-specific, industry, and economic forces. Earnings estimates embody investors' opinions of Four Seasons factors such as sales growth, product demand, competitive industry environment, profit margins, and cost controls. Four Seasons stock prices adjust as these expectations change or are proven wrong. The main thing to remember is that equities with high expected earnings growth tend to underperform the market because it is usually difficult to meet the market's high expectations. Companies with low earnings expectations tend to do better than expected. Please use our latest analysis of Four expected earnings.

Four Seasons Gross Profit

Four Seasons Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing Four Seasons previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show Four Seasons Gross Profit growth over the last 10 years. Please check Four Seasons' gross profit and other fundamental indicators for more details.

Is Four Seasons valued wisely by the market?

Although in the United States, the Securities and Exchange Commission has enforced strong rules to prevent insiders from engaging in insider trading, finding insiders among active shareholders of Four Seasons is not uncomon. Institutional investor usually refers to an organization that invests money in Four Seasons on behalf of clients or other money managers. Buying and selling of large positions of Four Seasons stock by institutional investors can create supply and demand imbalances that result in sudden price moves of Four Seasons stock. Let's take a look at how the ownership of Four is distributed among investors.

Ownership Allocation

The market capitalization of Four Seasons Education is currently $18.43 Million. Four Seasons Education retains significant amount of outstanding shares owned by insiders. An insider is usually defined as a CEO, other corporate executive, director, or institutional investor who own at least 10% of the company's outstanding shares. Since such a large part of the company is owned by insiders, it is advisable to analyze if each of these insiders have been buying or selling the stock in recent months. Be advised that no matter how volatile the entity is, if the real value of the firm is more than the value suggested by the market, you should consider buying it.
Retail Investors
68.13%
Insiders
27.2%
Retail Investors68.13
Insiders27.2
Institutions4.67
Please be aware that individual investors typically purchase shares for their personal accounts and usually in smaller quantities compared to institutional investors. While they might influence Four Seasons' decisions if they own a significant combined portion of its shares, such influence is relatively rare. Conversely, institutional investors - like mutual funds, pension funds, hedge funds, and other investment companies - often have a substantial sway over Four Seasons' decisions due to their larger holdings.
 2020 2021 2022 2023 (projected)
Revenues USD43.1M39.7M5.0M10.2M
Revenues280.3M250.2M34.2M67.4M

Asset Utilization

The asset utilization indicator refers to the revenue earned for every dollar of assets a company currently reports. Four Seasons has an asset utilization ratio of 5.69 percent. This implies that the company is making $0.0569 for each dollar of assets. An increasing asset utilization means that Four Seasons Education is more efficient with each dollar of assets it utilizes for everyday operations.
Current Assets
314.2 M
Current Assets314.24 Million85.55
Assets Non Current49.96 Million13.6
Goodwill2.54 Million0.69
Tax Assets573,1580.16
"Buy low, sell high" is a common investment adage, but does it apply to Four Seasons Education stock? The company, operating in the Education & Training Services industry, has been grappling with significant challenges, as evidenced by its negative operating margin of -1.04 and a net income loss of $33.5 million. Despite these financial headwinds, the company maintains a strong balance sheet with a current ratio of 5.62X and total stockholder equity of $457.7 million. However, the company's market capitalization stands at a mere $18.43 million, suggesting that the market is not optimistic about its future prospects. Furthermore, the company's high probability of bankruptcy at 29.64% raises concerns about its financial stability. In conclusion, while Four Seasons Education has some positive fundamentals, its overall financial health and market sentiment indicate that it may not be a viable investment opportunity at this time.

Will Four Seasons growth be trustworthy after the gain?

The recent statistical analysis of Four Seasons Education (Cayman) Inc. has revealed a significant decrease in the coefficient of variation, which currently stands at 34181.04. This reduction signifies a lower level of volatility and risk associated with the stock, potentially making it a more appealing investment. However, while this enhancement in stability is a positive development, it does not necessarily assure future growth. Investors should persist in monitoring the company's financial performance and market conditions before determining whether the recent gains are a reliable indicator of future growth potential. Four Seasons Education exhibits above-average downside volatility for the selected time horizon. We recommend investors to further scrutinize Four Seasons Education and ensure that all market timing and asset allocation strategies align with the estimation of Four Seasons' future alpha. Understanding different market volatility trends often assists investors in timing the market. Proper utilization of volatility indicators allows traders to measure Four Seasons' stock risk against market volatility during both bullish and bearish trends.
The heightened level of volatility that accompanies bear markets can directly impact Four Seasons' stock price, adding stress to investors as they witness their shares' value decline. This typically compels investors to rebalance their portfolios by purchasing different stocks as prices drop. In conclusion, Four Seasons Education (Cayman) Inc. stock may not be an attractive investment at this point. Despite its current Valuation Market Value of 9.25, the company's Valuation Real Value is calculated at 7.88, indicating a potential overvaluation. Furthermore, the company's Naive Expected Forecast Value is 9.15, which is closely aligned with its current market value, suggesting limited upside potential. The possible downside price is estimated at 6, which could mean a significant loss for investors. Additionally, the analyst consensus is a 'Strong Sell', with one analyst even recommending a 'Strong Sell'. As the fiscal year end approaches in February, investors should tread carefully and consider other investment options. .

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Editorial Staff

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Vlad Skutelnik do not own shares of Four Seasons Education. Please refer to our Terms of Use for any information regarding our disclosure principles.

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