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What: Xueda Education Group
So what: Surprised? Don't be. In China, just like in the U.S., investing is all about the future, and at Xueda, it's the future that's in doubt. After reporting the earnings beat, Xueda dumped cold water on hopes for a repeat in Q3, warning that revenue could come in as much as 10% below consensus (at $50 million).
Now what: For the fiscal year, Xueda is sticking with its previous promise to pull in between $222 million and $235 million in annual revenues. That would be at least 27% annual growth, and perhaps fast enough growth to justify Xueda's 33 P/E ratio. On a cautionary note, I'd want to see the company's most recent cash flow statement before buying. (Xueda did not include cash flow information in its earnings release. Tsk, tsk.) Still, at last report, free cash flow was running comfortably ahead of reported earnings. If that's still the case, the company could be an even bigger bargain than it already looks.
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