Stock Idea of the Decade? Analyzing a 2020s Chinese Education Technology ADR Boom
Open Access
- Author:
- Young, William J
- Area of Honors:
- Finance
- Degree:
- Bachelor of Science
- Document Type:
- Thesis
- Thesis Supervisors:
- Fariborz Ghadar, Thesis Supervisor
Brian Spangler Davis, Thesis Honors Advisor - Keywords:
- American depositary receipt
American depositary share
China
financial model
GSX Techedu
Microsoft Excel
SEC
stock
stock market
stock exchange - Abstract:
- Too good to be true? An underfollowed, highly volatile family of stocks known as American Depositary Receipts of Chinese education technology companies—what the author has termed, “edtech CADRs”—appears to be driven by a sociocultural craze of monumental financial proportions occurring thousands of miles away from New York City: allegedly skyrocketing, non-stopping demand by Chinese youth and their families for English language and K-12 subject tutoring, gaokao and zhongkao standardized test preparation, and professional skills training services. Even after soaring 126.10% in the span of nearly seven months from its 6/5/2019 to 1/2/2020 closes, Chinese online large-class K-12 after-school tutor GSX Techedu Inc. (NYSE: GSX) has mysteriously yet to earn a place in the risk palette of the typical American retail investor. The author reveals that the Beijing-based edtech innovator who reportedly experienced otherworldly 307.17% net revenue growth from 2017-2018 has a group of peers that, after a relative return analysis over a 5-year period, share an extraordinary risk-reward profile. Line-item forecasts in an approximately 500-line financial and operating Microsoft Excel model constructed by the author with recent GSX F-1 data from the Securities and Exchange Commission (SEC) suggest that the company might have considerable room for bottom-line growth, and as Shanghai challenges New York for the role as the world’s financial capital, GSX stock could become one of the most interesting, controversial equity investment ideas of the early 2020s. After the analysis, GSX stock appeared to experience staggering 100.06% price appreciation from its 1/2/2020 to 2/24/2020 closes.