Critical Comparison: Strategic Education (NASDAQ:STRA) versus Gaotu Techedu (NYSE:GOTU)

Strategic Education (NASDAQ:STRA) and Gaotu Techedu (NYSE:GOTU) are both consumer discretionary companies, but which is the superior investment? We will contrast the two businesses based on the strength of their profitability, valuation, dividends, earnings, risk, analyst recommendations and institutional ownership.

Insider & Institutional Ownership

93.3% of Strategic Education shares are held by institutional investors. Comparatively, 48.4% of Gaotu Techedu shares are held by institutional investors. 3.1% of Strategic Education shares are held by insiders. Comparatively, 44.9% of Gaotu Techedu shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Valuation and Earnings

This table compares Strategic Education and Gaotu Techedu’s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Strategic Education	$1.13 billion	2.10	$69.79 million	$2.90	33.35
Gaotu Techedu	$417.02 million	3.68	-$1.03 million	($0.01)	-587.41

Strategic Education has higher revenue and earnings than Gaotu Techedu. Gaotu Techedu is trading at a lower price-to-earnings ratio than Strategic Education, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Strategic Education has a beta of 0.5, indicating that its stock price is 50% less volatile than the S&P 500. Comparatively, Gaotu Techedu has a beta of 0.05, indicating that its stock price is 95% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Strategic Education and Gaotu Techedu, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Strategic Education	0	1	3	0	2.75
Gaotu Techedu	0	2	2	0	2.50

Strategic Education currently has a consensus target price of $120.50, suggesting a potential upside of 24.60%. Gaotu Techedu has a consensus target price of $6.58, suggesting a potential upside of 11.82%. Given Strategic Education’s stronger consensus rating and higher probable upside, research analysts clearly believe Strategic Education is more favorable than Gaotu Techedu.

Profitability

This table compares Strategic Education and Gaotu Techedu’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Strategic Education	6.16%	5.52%	4.17%
Gaotu Techedu	-0.10%	-0.10%	-0.06%

Summary

Strategic Education beats Gaotu Techedu on 12 of the 14 factors compared between the two stocks.

About Strategic Education

Strategic Education, Inc., through its subsidiaries, provides education services through campus-based and online post-secondary education, and programs to develop job-ready skills. The company operates through U.S. Higher Education, Australia/New Zealand, and Education Technology Services segments. It operates Strayer University that offers undergraduate and graduate degree programs in business, criminal justice, education, health services, information technology, and public administration at physical campuses located in the eastern United States, as well as through online; non-degree web and mobile application development courses through Hackbright Academy and Devmountain; and MBA online through its Jack Welch Management Institute. In addition, the company operates Capella University that provides post-secondary education; Torrens University, which offers undergraduate, graduate, higher degree by research, and specialized degree courses primarily in business, design and creative technology, health, hospitality, and education fields through online and on physical campuses located in Australia; Think Education, a vocational training organization; and Media Design School, which provides industry-endorsed courses in 3D animation and visual effects, game art and programming, graphic and motion design, digital media artificial intelligence, and creative advertising in New Zealand. It also offers Workforce Edge, a platform to employers that provides education benefits administration solutions; and Sophia Learning, which enables lower cost education benefits programs. Strategic Education, Inc. was founded in 1892 and is headquartered in Herndon, Virginia.

About Gaotu Techedu

Gaotu Techedu Inc., a technology-driven education company, provides online K-12 after-school tutoring services in the People's Republic of China. The company provides foreign language courses comprising English and Japanese, as well as test preparation courses for students taking language certification exams; and professional courses primarily for college students and adults preparing for professional qualification exams, such teacher's qualification, Chartered Financial Analyst designation, Certified Public Accountant designation, Certified Tax Agent designation, securities qualification exams, and other exams. It also offers admission courses for admission tests and interviews, including national graduate entrance examination, civil service examinations, and others; and consulting services. In addition, the company provides online IT education courses, such as computer programming, as well as online courses on professional computer coding; career development courses, including memory enhancement courses, leadership and management training courses, and others; and courses to prepare and pass certain language exams for study abroad, such as IELTS and TOEFL. Further, it provides non-academic tutoring and personal interest courses comprising chess learning, family relationships and education, humanities, and science courses; and designs and develops course outlines, interactive courseware, practice exercises, and lesson notes, as well as reference books, such as Chinese dictionary, dictionary of idioms, and past exam questions of college entrance examination. Additionally, the company offers smart devices; multi-function translation pen, an electronic translation pen with Chinese/English translation capabilities; and learning apps. The company was formerly known as GSX Techedu Inc. and changed its name to Gaotu Techedu Inc. in June 2021. Gaotu Techedu Inc. was incorporated in 2014 and is headquartered in Beijing, the People's Republic of China.