Top 5 Education Stocks to Buy for 2021

Apple sitting on classroom books

Put these five education stocks on your watchlist immediately.

The devastating COVID-19 pandemic has created the largest disruption of education systems in human history.

According to a recent UN policy brief, the virus has affected nearly 1.6 billion learners in more than 190 countries and all continents. What’s more, closures of schools and other learning spaces have impacted 94% of the world’s student population. In low and lower-middle income countries, that figure is up to 99%.

But while the education sector may have been hit hard by COVID-19 this year, education stocks have performed incredibly well and have been one of the bright spots of 2020.

Why such a big discrepancy?

Simply put, this pandemic has stimulated unprecedented innovation.

Practically overnight, schools were forced to explore new education strategies, and as the health crisis unfolded, education systems around the world were swift to react and adapt. 

Today we have revolutionary breakthroughs in online classes, self-guided learning, virtual check-ins, and a greater focus on demonstrated proficiency rather than time in class.  In the future, we are likely to see greater connectivity and digitization, better plans for safety in schools, better use of data and monitoring of learning, and the integration of cloud-based solutions to minimize disruptions and increase scale.

Of course, some of the companies behind these innovations are already making a huge impact.

Today, we’ll highlight 5 of the best education stocks for 2021 and show you why they are head and shoulders above the competition:

  1. Chegg, Inc. (NYSE:CHGG)
  2. New Oriental (NYSE:EDU)
  3. Tal Education (NYSE:TAL)
  4. Bright Horizons (BFAM)
  5. Pearson (NYSE:PSO)

Chegg, Inc. (NYSE:CHGG)

Founded in 2005 and headquartered in Santa Clara, California, Chegg is a leading direct-to-student learning platform that mainly targets high school and college students.

Through its paid subscription model, the company offers a variety of Chegg Services.  These include digital products and services and required materials that comprise its print textbooks and eTextbooks.  Services include Chegg Study (help with homework), Chegg Writing (online writing tools), Chegg Math Solver (mathematics problem solver), and Chegg Tutors (online tutors).  Chegg also offers Thinkful, which are online skills-based courses or things like data sciences, data analytics, software engineering, etc…

The company also provides other services, such as Chegg Prep and internships, college admission and scholarship services; rents and sells print textbooks and eTextbooks; and offers supplemental materials.

In 2015, Chegg Services revenue was $94.  In 2020, it’s expected to reach $508 million for a CAGR of 40% over the last 5 years.  Guidance for 2021 is $655 million in revenue for 29% YOY growth.  

New Oriental Education & Technology Group (NYSE:EDU)

Founded in 1993, New Oriental is the largest provider of private educational services in China – a country with the largest education system in the world with 260 million students and over 15 million teachers in about 514,000 schools.

The company’s wide range of educational programs, services, and products includes English and other foreign language training, overseas and domestic test preparation courses, all-subjects after school tutoring, primary and secondary school education, educational content and software, as well as online education.  

The company has had over 58.4 million student enrollments, including approximately 10.6 million enrollments in fiscal year 2020.  As of August 31, 2020, EDU had a network of 1,472 learning centers, including 112 schools, 12 bookstores and access to a nationwide network of online and offline bookstores through 160 third-party distributors, and over 42,400 highly qualified teachers in 98 cities.

Between 2015 to 2020, revenues grew from $1.25 billion to $3.58 billion for a CAGR of 23.5%.  Non-GAAP net income also grew from $208.1 million to $484.2 million for a CAGR of 18.4%.

TAL Education Group (NYSE:TAL)

Similar to New Oriental Education & Technology Group, TAL Education Group is a leading K-12 after-school tutoring services provider in China.

Founded in 2003, TAL Education Group offers comprehensive tutoring services to students from preschool to grade 12 through three flexible class formats: small classes, personalized premium services, and online courses.  

The services cover a wide variety of subjects including mathematics, physics, chemistry, biology, history, geography, political science, English, and Chinese.  It also provides tutoring services primarily through small classes under the Xueersi, Mobby, and Firstleap brand names; personalized premium services under Izhikang name, and online course through their website which is a gateway for online courses offered through

In 2011, TAL generated revenue of $111 million.  In 2020, TAL generated $3.272 billion in revenue, for a CAGR of 45.7%.  For 2020, TAL generated free cash flow of $856 million as well.

If the company can execute on its growth strategy of further penetration of existing markets, expansion into new markets, enhancement of content offerings, maintenance of premium pricing, and expansion of their online and mobile offerings, 2021 could be an excellent year for TAL Education Group.

Bright Horizons Family Solutions Inc. (NYSE:BFAM)

Founded in 1986 and headquartered in Watertown, Massachusetts, Bright Horizons Family Solutions Inc. is a leading global provider of child care and early education services, back-up care services, educational advisory services, and other workplace solutions for employers and families.  They have operations in the United States, Puerto Rico, the United Kingdom, Canada, the Netherlands, and India.

The company operates through three segments: Full Service Child Care and Early Education, Back-Up Care, and Educational Advisory Services. 

BFAM’s Full Service Child Care and Early Education segment has 1,084 centers, capacity for ~120,000 children, and accounts for ~82% of total revenue.  

Their Back-Up Care offers family support services for dependents of all ages and covers over 7 million people.  It accounts for ~14% of their total revenue.

And BFAM’s Educational Advisory Services offers tuition assistance and student loan repayment program administration, and related educational consulting services, as well as college admissions advisory services.  This segment accounts for 4% of total revenue.

Bright Horizons’ revenue boasts a 20-year CAGR of 11% while their adjusted EBITDA has a 20-year CAGR of 17%.

Their growth strategy for 2021 is to build new client relationships in each industry sector, cross-sell products to existing clients, identify 10-20 new locations next year, and potentially buy businesses as bolt-on acquisitions.

Pearson plc (NYSE:PSO)

Founded in 1844 and headquartered in London, England, Pearson plc provides educational products and services to governments, educational institutions, corporations, and professional bodies worldwide.  It operates in 70 countries around the world, with more than 22,500 employees.

The company operates through four operating segments that offer courseware services, including curriculum materials provided in book form and/or through access to digital content; and assessments, such as test development, processing, and scoring services.  

The segments are broken down to Global Online Learning (virtual schools and online program management), Global Assessment (virtual university enterprise, U.S. student assessment), International (assessment, english, schools and higher education), and North American Courseware (U.S. higher education courseware).  In addition, the company also operates schools, colleges, and universities; and provides online learning services in partnership with universities and other academic institutions. 

Revenues are diversified quite evenly between the four operating segments.  In the first half of 2020, Global Online Learning accounted for 21% of revenue, Global Assessment accounted for 27%, North American Courseware was 25%, and International was 27%.  Although sales are currently down year-over-year, Pearson is strategically well-placed to create value from the accelerated shift to digital and online learning in 2021 and beyond.

-Investing Insider Magazine

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