BABSON COLLEGE FUND. New Oriental Education & Technology Group (NYSE: EDU) Basic Information. Investment Thesis. Company Overview.

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1 Rating: BUY Price Target: $25.36 Close 10/25/2012 Price $17.06 Shares Outs. (mm) Market Cap. (bn) $ Wk Range $9.41-$30.63 Source: Google Finance Basic Information Beta 1.05 Cash & CE $428M Dividend Yield N/A P/E 20.4 Forward P/E 15.5 Source: BCF, Bloomberg Company Overview New Oriental Education & Technology Group Inc. is a provider of private educational services in China. The Company offers a range of educational programs, services and products consisting primarily of English and other foreign language training, test preparation courses for admissions and assessment tests in the United States, the People s Republic of China and Commonwealth countries, primary and secondary school education, development and distribution of educational content, software and other technology, and online education. It provides educational services under its New Oriental brand. Source: New Oriental Education & Technology Group New Oriental Education & Technology Group (NYSE: EDU) Industry: Education Services Actual Source: BCF Estimates, Thomson One, Company 10- K/10- Q Forecast Revenue (mm) $386 $558 $772 $1,039 $1,380 $1,809 Revenue Growth 32.1% 44.4% 40.0% 34.6% 32.8% 31.1% Gross Margin 61.9% 60.1% 65.9% 60.0% 60.0% 60.0% Operating Margin 20.0% 17.4% 15.1% 16.0% 16.0% 14.0% Profit Margin 20.1% 18.5% 17.2% 16.6% 16.1% 14.0% Consensus EPS $0.50 $0.66 $0.86 $1.10 $1.37 $1.60 BCF Est. EPS $0.50 $0.66 $0.86 $1.10 $1.42 $1.61 Investment Thesis We are initiating coverage on New Oriental Education & Technology Group with a Buy recommendation at the current price of $17.06 with a target price of $25.36 (49% upside potential). Our buy recommendation on New Oriental Education & Technology Group is based on several key factors: Industry Leader: New Oriental Education & Technology Group has a network of 55 schools, 664 learning centers, 32 New Oriental bookstores and over 5,000 third-party bookstores and over 17,600 teachers in 49 cities, as well as an online network with over 7.8 million registered users. It has established itself as the #1 provider for private education and enjoys pricing power. Secular Trend: As the Chinese economy continues to grow, there is an increasing trend of pursuing education overseas and demand for language training as well as foreign exam preparation. Short-term catalyst: After the most recent SEC investigation and the F-20 filing, there was no significant evidence found supporting the allegations. Strong Financial Health: The firm currently has $428 million in cash and equivalents and no long-term debt. Analysts BCF Consumer Team: Geoffrey Homer Steve Liu, CFA Matt Schwartz Kevin Webb invest.babson.edu 1/13

2 Key Investment Highlights Industry Leader The company has been growing top line and bottom line by over 30% over the past few years. Since its inception 20 years ago, it has established itself as the clear leader in the private education services industry. The company breaks down its services offerings into three major components: overseas test preparation programs, K-12 programs and VIP programs. The overseas component contributes16% of overall student enrollment and 34% of total revenue. This segment is closely related to the number of overseas students which has been growing at north of 20% over the past few years. The K-12 programs include POP kids and U-CAN courses. This segment is growing at over 50% in both revenue and enrollment. This is a result of the brand name recognition from the language-training segment. This segment is tied closely to the increasing family spending on education services outside of traditional primary education received from public schools. The VIP segment is the premium service that focuses on those students who want to have 1-on-1 tutoring. This is fastest growth component with over 60% enrollment growth and 70% cash receipts. In total, the brand recognition and clear leadership allows the company to set benchmark and become the undisputed authority in private education. Its status helps the company to expand to other service offerings such as publishing textbooks and partnering with other global publishers and produce Chinese version of many wellknown books. Secular Trend The growth story is closely tied to the continued growth in China and the increasing wealth of Chinese consumers. China s GDP is currently growing at 7.6%, a slower pace compared to the past decade. However, given the tremendous demand for urbanization, the growth engine is projected to continue well into the next decade. As the Chinese economy is slowly transitioning into more of a service economy from the current manufacturing economy, the demand for talents especially with overseas education will continue to grow. The primary education is viewed as rigid and unpractical, so parents are looking for other ways to better prepare their children for the competitive world. With the one child policy still in place, families are more willing to spend on education for their single child. On the other hand, the US and Europe, two of the major destinations for overseas students, continue to experience economic slowdown/recession. With the agenda to grow their economies, more relaxed regulations are being passed for foreign students to study in those countries. Lastly, the Chinese Yuan has been appreciating against the dollar and euro over the past few years, making overseas education more affordable for Chinese students. All the factors above contribute to the secular growth story of continued growth in students studying overseas. Short-term catalyst On July 13, 2012, the SEC informed EDU a formal order of investigation regarding consolidating its VIE into the company s consolidated financial statements. Prior to the announcement, the stock was trading at $22.4, and dropped below $10 after the announcement. On October 12, 2012, the investigation was concluded with no objection to the consolidation. The stock has rebounded back to $17.06 at market close on October 25 th. The company will release its FY1Q earnings on October 29 th. 1Q is the largest financial quarter for the firm as most revenue is generated during the summer vacation with students coming from all over the country to study at one of the schools. (See VIE structure graph in appendix) Strong Financial Health As an education services firm, most of the cost is related to paying for its teachers. The company has little fixed assets and currently carries no debt. The nature of the business requires that students pay upfront before receiving any services while teachers are being paid periodically. This results in a very short cash generation cycle and very little receivables and inventory level. The company is flux with cash and generates additional revenue through its short-term investments. This also allows the company to fund future expansions, as most of the second and third tier cities are still untapped. Also, the Chinese yuan is still viewed to be undervalued relative to the reporting currency, which will be beneficial. 2/13

3 Market Trends Stock Performance 5-year stock price performance of EDU vs. S&P 500 Index Source: Capital IQ 3/13

4 Strengths, Weaknesses, Opportunities, and Threats (S.W.O.T) Strengths Leader and benchmark for private education in China Pricing advantage Extensive nationwide network Thought leadership Opportunities Introducing services in 2 nd, 3 rd and 4 th quarters to smooth seasonality Expansion into second and third tier cities Weaknesses Inflexible due to size Threats Soft Chinese economy Boutique education services Decreasing quality of teachers Source: BCF Risks Political risks EDU is currently enjoying many preferential tax treatments from the government; however, if the legal or political environment were to change, the company may experience lower profits due to higher taxes. Chinese Economy If the U.S. economy weakens, consumers will have less discretionary income to spend on premium education. Competitors Many boutiques have emerged after the success of EDU, as the barrier to entry is low. It is still a fragmented market. Continued expansion The growth of the company is putting additional pressure on top management to maintain the quality of the services. Exchange rate Any adverse effect of exchange rate would impact the company in multiple fronts as consumers stop enjoying the added translation benefits while profits would decrease after translating into the reporting currency. Source: BCF 4/13

5 Valuation Our valuation is based upon 50/50 weighting of a discounted cash flow analysis (DCF) and comparable company analysis (CompCo). This analysis has yielded a price target of $25.36, which is approximately 49% higher than the October 25th closing price of $ Enterprise Value $ 4, Cash and Equivalents Perpetual Growth CompCo. DDM Total Debt - Fair Equity Value $4,496.5 Shares Outstanding Fair Stock Value $29.09 $ Mean Fair Stock Value $ /13

6 DCF Model New Oriental Education & Technology Group In millions of USD, except per share items 2010 Actual Forecast Operating Income (EBIT) $ $ $ $ $ $ Taxes EBIAT Depreciation & Amortization Increase (Decrease) in Net Working Capital (39.20) (102.50) (116.60) (69.70) (68.42) (66.70) Capital Expenditures Free Cash Flow to Enterprise $ $ $ $ $ $ Terminal Value $ 4, Total Cash Flow to Enterprise $ $ $ $ $ $ 4, Discounted Free Cash Flow $ $ $ $ 3, Cost of Capital Sources Beta 1.05 Bloomberg Risk-free Rate 1.83% 10-yr Treasury / Treasury.gov Risk Premium 6.50% Historical Cost of Debt (after-tax) 3.32% BBB-rated, Bloomberg Cost of Equity 8.66% CAPM Weight of Debt 0.0% Bloomberg Weight of Equity 100.0% Bloomberg Tax Rate 7.30% EDU 3-Yr Average Growth Rate 4.00% BCF Estimate WACC 8.7% Sources: BCF, Bloomberg Sensitivity Analysis Due to the inherent uncertainty of discounted cash flow models, we used a sensitivity analysis to show the range of values EDU could have with different terminal growth rates and WACC calculations. Terminal Growth Rate 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% % WACC 8.7% % % CompCo Analysis We used Bridgepoint Education, Capella Education, Grand Canyon Education, K12, Strayer Education and TAL Education Group in our CompCo analysis. We used the median forward P/E multiple of 13.1x and applied a 50% premium due to EDU having significantly higher top line and bottom line growth than the comps. Our analysis yielded a value of $21.64, which is 27% above the current price. 6/13

7 ALL NUMBERS ARE LTM Gross EBITDA Profit Revenue Net Income Total Company Ticker Margin Margin Margin Growth Growth Debt/Capital Bridgepoint Education, Inc. BPI 71.7% 26.7% 15.2% 13.9% -12.7% - Capella Education Co. CPLA 57.5% 18.5% 9.4% -2.3% -31.4% - Grand Canyon Education, Inc. LOPE 55.5% 24.8% 12.7% 13.5% 48.1% 10.0% K12, Inc. LRN 41.1% 8.5% 2.5% 35.6% 37.1% 6.3% Strayer Education Inc. STRA 50.6% 28.9% 14.6% -10.4% -31.2% 59.3% TAL Education Group XRS 47.8% 17.7% 14.3% 47.7% 15.1% - Mean 54.0% 20.9% 11.4% 16.3% 4.2% 25.2% Median 53.1% 21.7% 13.5% 13.7% 1.2% 10.0% New Oriental Education & Technology EDU 60.6% 18.6% 17.2% 38.3% 30.4% - Return on Return on Return on Company Ticker Assets Equity Capital Bridgepoint Education, Inc. BPI 31.9% 58.4% 55.5% Capella Education Co. CPLA 20.9% 28.1% 26.2% Grand Canyon Education, Inc. LOPE 17.1% 34.8% 30.1% K12, Inc. LRN 2.9% 4.4% 3.4% Strayer Education Inc. STRA 45.5% 97.2% 81.5% TAL Education Group XRS 9.5% 14.1% 14.1% Mean 21.3% 39.5% 35.1% Median 19.0% 31.5% 28.2% New Oriental Education & Technology EDU 13.3% 21.0% 16.9% EV/ EV/ Company Ticker Revenue EBITDA Forward P/E Bridgepoint Education, Inc. BPI 0.2x 0.7x 4.1x Capella Education Co. CPLA 0.7x 3.8x 11.9x Grand Canyon Education, Inc. LOPE 2.0x 8.2x 14.3x K12, Inc. LRN 1.0x 11.5x 31.4x Strayer Education Inc. STRA 1.2x 4.1x 10.4x TAL Education Group XRS 2.1x 12.0x 17.1x Mean 1.2x 6.7x 14.9x Median 1.1x 6.2x 13.1x New Oriental Education & Technology EDU 2.5x 13.6x 15.5x EDU Implied Price Per Share $21.64 Source: Bloomberg, Capital IQ 7/13

8 Income Statement New Oriental Education & Technology Group Income Statement In millions of USD, Actual Aug-12 Nov-12 Feb-12 May Forecasts except per share items Revenue: Education program and services $ $ $ $ $ $ $ $ $ $ 1,227.0 $ 1,595.1 YoY Growth 32% 44% 39% 42% 28% 37% 36% 34% 32% 30% Books and others $ 26.2 $ 33.5 $ 49.4 $ 20.1 $ 11.9 $ 18.0 $ 28.0 $ 78.0 $ $ $ YoY Growth 28% 47% 76% 7% 82% 65% 58% 40% 40% 40% Total Revenue $ $ $ $ $ $ $ $ $ 1,038.8 $ 1,379.9 $ 1,809.2 YoY Growth 32% 44% 40% 37% 31% 38% 38% 35% 33% 31% Cost of Goods Sold $ $ $ $ 92.7 $ 61.2 $ 71.9 $ 78.2 $ $ $ $ % of revenue 38% 38% 40% 34% 46% 61% 61% 39% 40% 40% 40% Gross Profit $ $ $ $ $ 70.8 $ $ $ $ $ $ 1,085.5 % of revenue 62% 62% 60% 66% 54% 59% 60% 61% 60% 60% 60% Selling, general and administrative expenses $ $ $ $ 84.5 $ 74.8 $ 86.0 $ $ $ $ $ % of revenue 41% 42% 43% 31% 57% 37% 55% 45% 44% 44% 46% Depreciation $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - % of revenue 0% 0% 0% 0% 0% 2% 2% 0% 0% 0% 0% Operating Income $ 61.0 $ 77.4 $ 97.0 $ 94.8 $ (4.0) $ 16.6 $ 9.4 $ $ $ $ % of revenue 21% 20% 17% 35% -3% 10% 5% 15% 16% 16% 14% Interest (income) expense $ (6.6) $ (6.5) $ (13.0) $ - $ - $ - $ (25.5) $ (25.5) $ (20.0) $ (20.0) $ (20.0) % of revenue 2% 2% 2% 0% 0% 0% 13% 3% -2% -1% -1% Other (income) expense, net $ (0.6) $ 0.3 $ (1.3) $ (5.2) $ (6.4) $ (7.1) $ 17.4 $ (1.2) $ - $ - $ - % of revenue 0% 0% 0% -2% -5% -4% 9% 0% 0% 0% 0% Income Before Taxes $ 68.1 $ 83.6 $ $ $ 2.4 $ 23.7 $ 17.4 $ $ $ $ % of revenue 23% 22% 20% 37% 2% 14% 9% 19% 18% 17% 15% Income tax expense $ 7.3 $ 6.0 $ 8.2 $ 9.2 $ (0.9) $ 1.2 $ 1.2 $ 10.8 $ 14.0 $ 18.1 $ 20.6 % of revenue 2% 2% 1% 3% -1% 1% 1% 1% 1% 1% 1% Net Income from continuing operations $ 60.9 $ 77.6 $ $ 90.7 $ 3.3 $ 22.4 $ 16.2 $ $ $ $ % of revenue 21% 20% 18% 33% 3% 13% 8% 17% 17% 16% 14% Net Loss from discontinued operations $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Net Earnings $ 60.9 $ 77.6 $ $ 90.7 $ 3.3 $ 22.4 $ 16.2 $ $ $ $ % of revenue 21% 20% 18% 33% 3% 13% 8% 17% 17% 16% 14% Diluted Shrs. Outstanding $ $ $ $ $ $ $ $ $ $ $ Diluted EPS (as reported) Source: New Oriental Education & Technology Group 10-K/10-Q/BCF Estimates 8/13

9 Balance Sheet New Oriental Education & Technology Group Balance Sheet Actual In millions of USD Assets Current Assets: Cash And Equivalents $ $ Short Term Investments Accounts Receivable Other Receivables Inventory Prepaid Exp Deferred Tax Assets, Curr Restricted Cash Other Current Assets Total Current Assets Property, plant and equipment, net Long-term Investments Goodwill Other Intangibles Deferred Tax Assets, LT Other Long-Term Assets Total Assets $ $ 1,128.8 Liabilities and Shareholder Equity Current Liabilities: Accounts payable Accrued liabilities Income taxes payable Unearned revenue Other current liabilities Total Current Liabilities Def. Tax Liability, Non-Curr Total Liabilities $ $ Common stock Additional paid-in capital Retained earnings Treasury stock - - Comprehensive income and other Total Shareholder Equity $ $ Total Liabilities and Shareholder Equity $ $ 1,128.8 Source: New Oriental Education & Technology Group 10-K 9/13

10 Cash Flow Statement New Oriental Education & Technology Group Cash Flow Statement Actual In millions of USD Operating activities: Net Income $ 77.8 $ $ Depreciation & Amort Amort. of Goodwill and Intangibles Minority Int. in Earnings (Gain) Loss From Sale Of Assets Asset Writedown & Restructuring Costs Stock-Based Compensation Provision & Write-off of Bad debts Other Operating Activities (2.1) (1.0) (3.3) Change in Acc. Receivable (0.4) 0.3 (2.2) Change In Inventories (2.0) 0.1 (1.8) Change in Acc. Payable 1.7 (2.1) (0.7) Change in Unearned Rev Change in Inc. Taxes Change in Other Net Operating Assets (0.8) Net cash (used) provided by operating activities $ $ $ Investing Activities: Capital Expenditure (19.6) (49.1) (71.7) Sale of Property, Plant, and Equipment Cash Acquisitions (0.5) (1.9) (3.5) Divestitures Sale (Purchase) of Intangible assets - (0.4) - Invest. in Marketable & Equity Securt. (78.1) (147.0) (72.3) Net (Inc.) Dec. in Loans Originated/Sold Other Investing Activities 0.0 (2.7) 0.6 Net cash (used) provided by investing activities $ (97.9) $ (198.2) $ (143.7) Financing Activities: Short Term Debt Issued Long-Term Debt Issued Short Term Debt Repaid Long-Term Debt Repaid Issuance of Common Stock Repurchase of Common Stock (30.0) - - Total Dividends Paid Other Net cash (used) by financing activities $ (17.6) $ 6.4 $ 0.9 Foreign Exchange Rate Adj. (0.1) (Decrease) increase in cash Cash at beginning of period $ $ $ Cash at end of period $ $ $ Source: New Oriental Education & Technology Group 10-K 10/13

11 Value Line Report RECENT NEW ORIEN. ED. (ADS) NYSE-EDU PRICE P/E RATIO TIMELINESS 4 Lowered 4/27/12 SAFETY 3 New 7/30/10 TECHNICAL 4 Raised 10/26/12 BETA 1.05 (1.00 = Market) PROJECTIONS Ann l Total Price Gain Return High 55 (+210%) 32% Low 35 (+95%) 18% Insider Decisions D J F M A M J J A to Buy Options to Sell Institutional Decisions 4Q2011 1Q2012 2Q2012 to Buy to Sell Hld s(000) Percent shares traded New Oriental Education and Technology Group is incorporated in the Cayman Islands. It had its initial public offering in September of million American depository shares (ADSs) were issued at $15.00 per ADS and the lead underwriters were Goldmann Sachs and Merill Lynch. A secondary offering of 598,399 ADSs at $41.50 per ADS occurred in February of CAPITAL STRUCTURE as of 5/31/12 Total Debt None. Leases, Uncapitalized Annual rentals $106.2 mill. No Defined Benefit Pension Plan Pfd Stock None Common Stock 158,379,387 ADSs. Market Cap: $2.8 billion (Mid Cap) CURRENT POSITION /31/12 ($MILL.) Cash Assets Receivables Inventory Other Current Assets Accts Payable Debt Due Other Current Liab ANNUAL RATES Past Past Est d of change (per ADS) 10 Yrs. 5 Yrs. to Revenues % 23.5% Cash Flow % 20.5% Earnings % 19.5% Dividends Nil Book Value % 24.5% Fiscal Year Ends QUARTERLY REVENUES ($ mill.) A Aug.31 Nov.30 Feb.28 May 31 Full Fiscal Year Fiscal Year Ends EARNINGS PER ADS AB Aug.31 Nov.30 Feb.28 May 31 Full Fiscal Year QUARTERLY DIVIDENDS PAID Mar.31 Jun.30 Sep.30 Dec.31 Calendar NO CASH DIVIDENDS 2010 BEING PAID (A) Fiscal year ends May 31st. LEGENDS.... Relative Price Strength 4-for-1 split 8/11 Options: Yes Shaded areas indicate recessions Full Year Trailing: 21.3 RELATIVE ( Median: ) P/E RATIO DIV D NMF 1.14 YLD Nil High: Low: NMF NMF % 25.1% 26.4% 24.4% % 6.0% 6.9% 10.7% % 21.7% 24.4% 20.9% d % 12.0% 16.4% 17.4% % 12.0% 16.4% 17.4% NMF 12.0% 16.4% 17.4% New Oriental Education got some good news on the regulatory front. As mentioned in our July report, the company received a formal order of investigation from the SEC on July 17th. The investigation was related to its consolidation of Beijing New Oriental Education & Technology Group, a variable interest entity of the company, into EDU s financial statements. Management fully cooperated with U.S. authorities and, on October 12th, it announced that the SEC had ultimately approved of the merger of assets, among other accounting moves. We view the resolution favorably, as it removes some of the overhang that has plagued the shares over the past few months. We think fiscal 2013 (ends May 31st) will be another good year for New Oriental. Although sales are expected to rise between 25% and 30% for the year, the rate is a bit slower than those of previous years. The company noted it was facing some economic headwinds, including slowing Chinese consumer spending. Enrollment growth is expected to slow to about 10%. Margins for the year will likely be pressured by increased competition, as 4-for-1 (B) Diluted earnings, U.S. GAAP. Reported in (C) In millions of ADSs. Each ADS equals 1 U.S. dollars. Next earnings report due late January. common share. Adjusted for split. VALUE LINE Target Price Range % TOT. RETURN 9/12 8 THIS VL ARITH.* STOCK INDEX 1 yr yr yr VALUE LINE PUB. LLC Revenues per ADS A Cash Flow per ADS Earnings per ADS AB Nil Div ds Decl d per ADS Nil Cap l Spending per ADS Book Value per ADS Equiv ADSs Outst g C Avg Ann l P/E Ratio Relative P/E Ratio Avg Ann l Div d Yield Nil Revenues ($mill) A % 20.3% 19.5% 19.5% Operating Margin 24.0% Depreciation ($mill) Net Profit ($mill) % 7.5% 12.0% 12.0% Income Tax Rate 15.0% 20.1% 18.2% 17.3% 17.3% Net Profit Margin 21.4% Working Cap l ($mill) Nil Long-Term Debt ($mill) Nil Shr. Equity ($mill) % 17.7% 19.3% 22.0% Return on Total Cap l 27.5% 18.2% 17.7% 19.3% 22.0% Return on Shr. Equity 27.5% 18.2% 17.7% 19.3% 22.0% Retained to Com Eq 27.5% Nil All Div ds to Net Prof Nil BUSINESS: New Oriental Education & Technology Group, Inc. provides private educational services primarily in China. It offers a range of educational programs, services, and products consisting primarily of English and other foreign language training; test preparation courses for admissions and assessment tests in the United States, the People s Republic of China, and Commonwealth countries; primary and secondary school education; development and distribution of educational content; software and other technology; and online education. Has 13,496 full time employees. Chairman & C.E.O.: Minhong Yu. Address: No. 6 Hai Dian Zhong Street, Haidian District, Beijing , China. Tel.: Internet: there are low entry barriers in its K-12 segment, meaning it won t be able to charge as high tuitions as it would like. Nevertheless, we still look for a nearly 25% rise in share net for the year. The company continues to make significant investments to support its growth. Due to its ongoing expansion plans, EDU has been improving its operational and technological systems. New Oriental also noted that because it is intent on hiring top teachers, its staff costs have increased rapidly over the past few quarters. Although these moves will temper earnings in the near term, we believe they will boost sales and profits in the years to come. Shares of New Oriental Education are ranked to trail the broader market averages in the coming six to 12 months. Although we look for strong, albeit slowing, enrollment gains during this time frame, elevated short-term expenses will continue to temper earnings growth in the coming quarters. Over the 3- to 5-year period, however, these shares offer wide recovery potential. Iason Dalavagas October 26, 2012 Company s Financial Strength B++ Stock s Price Stability 30 Price Growth Persistence 90 Earnings Predictability , Value Line Publishing LLC. All rights reserved. Factual material is obtained from sources believed to be reliable and is provided without warranties of any kind. THE PUBLISHER IS NOT RESPONSIBLE FOR ANY ERRORS OR OMISSIONS HEREIN. This publication is strictly for subscriber s own, non-commercial, internal use. No part To subscribe call of it may be reproduced, resold, stored or transmitted in any printed, electronic or other form, or used for generating or marketing any printed or electronic publication, service or product. 11/13

12 Appendix 2011 Structure 2012 Structure Source: Deutsche Bank 12/13

13 IMPORTANT DISCLOSURE Babson College Fund The Babson College Fund (BCF) is an academic program in which selected students manage a portion of the Babson College endowment. The program seeks to provide a rich educational experience through the development of investment research skills and the acquisition of equity analysis and portfolio management experience. Please visit for more information. Analyst Contact Information Geoffrey Homer s s ghomer1@babson.edu Steve Liu, CFA s s sliu6@babson.edu Matthew Schwartz s s mschwartz2@babson.edu Kevin Webb s s kwebb1@babson.edu Definition of Ratings BUY: Expected to outperform the Dow Jones U.S. Consumer Goods Index (IYK), producing above- average returns. HOLD: Expected to perform in line with the Dow Jones U.S. Consumer Goods Index (IYK), producing average returns. SELL: Expected to underperform the Dow Jones U.S. Consumer Goods Index (IYK), producing below- average returns. References 1. BCF Estimates 2. Big Lots Investor Relations 3. Capital IQ 4. Yahoo Finance 5. Thomson ONE Banker 6. Bloomberg 7. Morningstar 8. Valueline 9. FactSet 13/13