Youdao

DAO

Education & Training Services · Consumer Defensive

Price

$14.55

+0.38 (+2.68%)

Market Cap

$1.72B

Exchange

New York Stock Exchange

Winston Score

Winston is serious

Below-average fundamentals — multiple weak pillars.

Share count falling — buybacks

−1.5% over 4y

The company has reduced its share count over this period, returning value to shareholders through buybacks.

Diluted shares outstanding: 121.7M (2021) → 119.9M (2025)

Youdao is a Chinese education technology company owned by NetEase, one of China's largest internet firms. It makes learning tools and apps for students and adults in China, including an online dictionary, language learning courses, and AI-powered tutoring software. Its products serve millions of everyday learners as well as schools and businesses looking for digital education solutions.

Youdao earns money by selling online courses, charging fees for its learning devices like smart dictionaries and pens, and licensing its AI education software to institutions. It operates almost entirely in China, which makes it heavily exposed to the Chinese government's strict rules around private education — regulators sharply restricted for-profit tutoring in 2021, forcing Youdao to restructure its business. The company's main growth bet is its AI learning tools, but thin operating margins and a deeply negative return on invested capital signal that profitability remains a serious ongoing challenge.

Winston Score History

Growth Profile

For growth stock investors

When traditional metrics don't capture the full picture, these are the signals growth stock investors use instead.

Revenue Growth

+3.8% YoY

YoY Growth Rate

Slow revenue growth

EPS Growth

-49.2% YoY

YoY Growth Rate

Earnings declining

R&D Spend

$514M/ year

→ Flat (-5% vs prior year)

8.7% of revenue

4.4x the sector average (2%)

Steady R&D investment year-over-year

Insider Activity

9.3%ownership

Insiders own a meaningful stake in the company

Cash Position

Cash flow positive

$531M cash & investments

Company generates more cash than it spends — no dilution risk from fundraising

Growth context

Youdao is growing revenue at 4% year-over-year. The Winston Score measures business quality today — these growth metrics show what could matter tomorrow.

The Winston Score above measures business quality today. Growth stocks often score lower because they invest in the future rather than maximising current profits. These metrics show what matters most for evaluating that future.

Score breakdown

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Quality

Gross Margin

44.7%

Healthy — 44.7% gross margin

Operating Margin

4.3%

Thin — 4.3% operating margin

ROCE

N/A

—

Data not available

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Growth

Sales YoY

+7.7%

Steady sales growth (7.7% YoY)

EPS YoY

-52.8%

Earnings shrinking (-52.8% YoY)

Earnings per share down more than 10%. Either a bad year, or a real decline.

EPS Consistency

0/8 quarters

Earnings rarely grow — volatile business

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Cash Flow

Cash Conversion

Weak — only 0% of profit becomes cash

FCF Margin

0.0%

Thin free cash flow (0.0%)

FCF margin between 0% and 10%. Some cash from sales, but not a lot.

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Stability

Debt / Equity

N/A

—

Data not available

Interest Cover

3.02x

Tight — interest eats into profit (3.0x)

Interest coverage between 3 and 8. Profits cover interest several times over.

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Valuation

P/E Ratio (TTM)

25.0x

Growth-priced — P/E 25.0

P/E above the market average. People are paying up for expected growth.

P/E vs Forward

+16.4

GROWING

Earnings expected to grow meaningfully — cheaper on forward P/E (25.0 → 8.7)

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Dividends

Not applicable for this business.

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