One-glance verdict
Undervalued
$11.40 our estimate vs market $2.46
Wall Street consensus: $3.75 (-67.2% lower than our fair-value estimate)
78% below our estimate, below the bear case
Fundamentals snapshot
Gaotu Techedu Inc.
GOTU · NYQ · Consumer Defensive · Education & Training Services
Current price
$2.46
52-week range
$1.40 - $3.38
Market cap
$578.24M
Balance sheet
Healthy
-12.60x Concerning
Net cash $323.08M. Interest coverage shows how many times profit covers the interest bill.
What stands out
2 Rewards
2 Risks
2 rewards · 2 risks
- Reward Revenue grew 40.9% last year.
- Reward Free cash flow was positive in 6/10 years.
- Risk Return on equity was -25.1% last year — the company lost money on shareholders' equity.
- Risk Operating margin compressed from -4.7% to -9.0% over 3 years.
What this company does
Gaotu Techedu Inc.
Gaotu Techedu is a Chinese education company that provides a wide range of tutoring and training services to students, from young children to adults. The company primarily makes money from course fees and by selling educational materials like books and digital learning tools. This is important because its performance is heavily tied to its ability to attract students and navigate the strict government regulations within China's education industry.
How the company got here
Gaotu started in 2014 as GSX Techedu, an online tutoring company in China that grew very quickly. A major turning point came in 2021 when the Chinese government introduced new rules, known as the "Double Reduction" policy, to reduce the burden on students. These regulations banned for-profit tutoring for school subjects, which was the company's main business and caused its stock price to fall dramatically. In response, the company changed its name to Gaotu Techedu and was forced to completely rethink its business, shifting away from K-12 academic tutoring to other areas of education.
What it actually does
Gaotu Techedu is a technology-focused education company in China that provides learning services for a wide range of students, from young learners to adults. It offers online courses, sells educational books, and develops digital learning tools like apps and smart devices. The company uses artificial intelligence (AI) to personalize the learning experience and make it more engaging. Think of it as a digital school and bookstore that offers classes and tools for professional development, exam preparation, and other non-school subjects.
Learning Services
This is the company's largest business, making up almost all of its revenue (the total money it brings in from sales). Instead of the school-subject tutoring it used to do, this segment now focuses on other areas. For college students and adults, it offers courses to prepare for postgraduate entrance exams, civil service exams, and professional qualification tests. It also provides non-academic tutoring for younger students in areas like English and personal development, as well as language training for tests like TOEFL and IELTS for those planning to study abroad.
Educational Content & Digitalized Learning Products
This is a much smaller but growing part of Gaotu's business. This segment sells physical products like books and reference materials for exams. It also creates and sells digital tools, such as AI-powered reading apps for children, writing assessment tools that give instant feedback, and smart learning devices. Customers, who are students and learners, pay for these specific products to supplement their studies.
What management is betting on now
After the government regulations upended its original business, Gaotu's management is now focused on growing in areas outside of traditional K-12 academic tutoring. The company is heavily investing in professional and vocational training for adults who are looking to advance their careers. It is also putting a strong emphasis on using artificial intelligence (AI) to improve its courses and create better digital learning tools, hoping this technology will make its products more effective and efficient. The company's guidance (its forecast for future performance) suggests a focus on achieving steady growth while carefully managing costs to become profitable again.
Price history
How the share price has moved
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Loading price history…
Earnings history
Last 8 quarters — what happened
Click any quarter to read the call summary and what the numbers say.
FY2024 Q4
$10.93M
FY2025 Q4
$35.26M
Revenue
$878.98M
Net income
$-46.23M
Diluted EPS
-0.28
Operating cash flow
$59.50M
Free cash flow
$35.26M
Fetching…
Sources
Revenue
$623.84M
Net income
$-143.71M
Diluted EPS
-0.84
Operating cash flow
$35.35M
Free cash flow
$10.93M
Fetching…
Sources
Is it cheap or expensive?
Fair value $11.40 vs current price $2.46
Wall Street consensus is the average analyst price target: $3.75 (-67.2% lower than our fair-value estimate).
Our most-likely fair value is $11.40 a share — about 363.5% above today's price of $2.46, so the stock currently looks cheap (undervalued).
Is it drowning in debt?
Healthy
Net cash $323.1M - more cash than debt. Interest coverage -12.6x.
Net debt
$-323.08M
Interest coverage
-12.60x
Gaotu Techedu Inc.'s profit covers its interest bill about 0.0 times over. which is weaker than most peers shown here and 1 peers sit below 1x, which is the danger zone where profit does not fully cover the interest bill.
Healthy
Worse cushion
Baseline
Better cushion
GOTU
BASELINE
Gaotu Techedu Inc.
Total debt $167.48M Interest coverage -12.60x This is the baseline the peer rows are being compared against.
Total debt $50.72M Interest coverage -194.67x Neither company has much profit cushion over interest right now.
Total debt $545.98M Interest coverage 38.27x This peer still has a real interest-payment cushion, while GOTU does not.
Total debt $153.47M Interest coverage 12.73x This peer still has a real interest-payment cushion, while GOTU does not.
Total debt $255.11M Interest coverage 3.62x This peer still has a real interest-payment cushion, while GOTU does not.
What you should know
The case for and against GOTU
2 Rewards
2 Risks
Rewards
-
Revenue grew 40.9% last year.
-
Free cash flow was positive in 6/10 years.
Risks
-
Return on equity was -25.1% last year — the company lost money on shareholders' equity.
-
Operating margin compressed from -4.7% to -9.0% over 3 years.
The numbers
All the key metrics, grouped by purpose
Tap any ? icon to learn what it means.
Valuation
How expensive the stock looks
P/E (TTM)
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Forward P/E
17.11x
P/B
3.71x
P/S
0.09x
EV/EBITDA
5.26x
PEG ratio
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Profitability
How much profit each dollar creates
Gross margin
67.5%
Operating margin
-9.0%
Net margin
-5.0%
ROE
-25.1%
ROA
-4.5%
Health
Liquidity and balance-sheet strength
Debt / equity
1.07x
Current ratio
0.86x
Quick ratio
0.73x
Total debt
$167.48M
Total cash
$490.56M
Growth
How the business has been compounding
Revenue TTM
$2.28B
Revenue 5Y CAGR
-3.9%
EPS TTM
-0.21
EPS 5Y CAGR
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Cash flow
How much cash the business throws off
Operating CF TTM
$152.57M
Free CF TTM
$35.26M
FCF margin
1.5%
Dividend
Shareholder payout
Yield
—
Payout ratio
0.0%
Last ex-div date
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