China-based after-school tutoring provider TAL Education (TAL) has been impacted heavily by China’s recent regulatory scrutiny of the private education industry. In fact, given that the nation’s regulatory authorities intend to further strengthen their oversight and penalize private tutoring institutes for making misleading claims about their businesses, the question is, will the company be able to recover? Read on.Based in Beijing, China, TAL Education Group (NYSE:TAL) offers tutoring services to after-school K-12 students in China. Its shares have declined 40% year-to-date and 31.9% over the past month because of Chinese government’s efforts to curb the explosive growth of private tutoring services providers. In April, Beijing’s market regulator fined TAL, along with three other after-school tutoring institutions, for pricing violations.
TAL is currently trading 52.8% below its $90.96, 52-week high, which it hit on February 16.
Even though the company has been able to increase its total student enrollments year-over-year, its staggering losses and premium valuation could cause the stock to suffer further downside. In addition, since the regulatory pressure on the company is expected to continue building in the coming months, we think its future growth potential looks bleak.