TAL Education (NYSE: TAL) reported fiscal 2018 second-quarter revenues of $456 million, a 68 percent year-over-year improvement, and earnings of $0.12 per ADR. Overall enrollment more than doubled. In local currency, renminbi (RMB) (removing the impact of the foreign-exchange rate by converting into dollar terms), the growth is actually an even more robust 70 percent. The top line beat The Street’s expectations, but the $0.12 figure missed by $0.01. The slight miss was enough to send the stock down more than 14 percent for the day.

The earnings miss is largely attributable to lower-than-expected margins driven by TAL’s summer promotion, which increased enrollment by an estimated 200,000 to 300,000, but at cheaper fees. TAL’s newly opened classrooms have yet to reach full capacity, so we expect enrollment to continue to ramp up.

TAL’s core top-line contributor are the Peiyou small classes, for which revenue grew 74 percent year-over-year in RMB terms while enrollment increased 77 percent. Due to expansion into lower-tiered cities, the average selling price ticked down—this is to be expected. Excluding the 5 tier-one cities, in which revenue is robustly growing, Peiyou revenues grew 70 percent.

Online-courses revenue increased 144 percent (again, in RMB terms) during the quarter and now contributes 6.3 percent of total revenue. Enrollment in these online courses nearly tripled compared to last fiscal year’s second quarter. As you may have guessed from the numbers, the average selling price was lower here due to the summer promotion and online advertising. The online classes helps TAL serve areas where students either cannot or have difficulty reaching physical classrooms due to distance, thereby increasing the company’s reach.

TAL doesn’t break down the revenue figures excluding the promotion and the lower-margin enrollments, but based on the available data, it is likely that the bottom line sans the lower-margin enrollments remained stable. In other words, there doesn’t appear to be any meaningful margin erosion in the core business.

In terms of expansion, TAL opened up 22 learning centers and about 400 new class rooms, compared to 60 learning centers and approximately 1600 new openings in the preceding quarter in what appears to be an intentional adjustment of expansion pace. For the fiscal year, though, overall capacity increase should still end up around the 50 percent goal set by the company.

As a high P/E stock, TAL is vulnerable to overreactions like this one since the market expectations are very high. Provided that the fundamental case for the company hasn’t changed, the selloff will likely turn out to be just a temporary bump in the road. As enrollments continue to be strong and the demand for an edge for Chinese students competing to enter top universities will likely continue to grow, we don’t believe TAL’s growth story has changed.

After the steep drop yesterday, the shares are now trading at about 56-times estimated forward 12-month earnings. If the margin compression in the just-reported quarter is indeed a temporary promotion-caused dip and not some fundamental erosion of the business, then the earnings multiple is actually quite reasonable. After all, even conservatively, TAL will likely be able to keep increasing profits at an average of at least 35 percent per year for the next three-to-five years.

We reiterate TAL is a “buy” up to $35.