Lincoln Educational (LINC)

Education company Lincoln Educational (NASDAQ:LINC) reported Q2 CY2025 results exceeding the market’s revenue expectations, with sales up 13.2% year on year to $116.5 million. The company’s full-year revenue guidance of $495 million at the midpoint came in 1.2% above analysts’ estimates. Its GAAP profit of $0.05 per share was significantly above analysts’ consensus estimates.

Company Overview

Established in 1946, Lincoln Educational (NASDAQ:LINC) is a provider of specialized technical training in the United States, offering career-oriented programs to provide practical skills required in the workforce.

A whole industry has emerged to address the problem of rising education costs, offering consumers alternatives to traditional education paths such as four-year colleges. These alternative paths, which may include online courses or flexible schedules, make education more accessible to those with work or child-rearing obligations. However, some have run into issues around the value of the degrees and certifications they provide and whether customers are getting a good deal. Those who don’t prove their value could struggle to retain students, or even worse, invite the heavy hand of regulation.

Lincoln Educational's primary competitors include Universal Technical Institute (NYSE:UTI), Strayer Education (NASDAQ:STRA), Adtalem Global Education (NYSE:ATGE), and Grand Canyon Education (NASDAQ:LOPE).

Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Lincoln Educational grew its sales at a 10.9% annual rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the consumer discretionary sector, which enjoys a number of secular tailwinds.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Lincoln Educational’s annualized revenue growth of 14.1% over the last two years is above its five-year trend, but we were still disappointed by the results.

We can better understand the company’s revenue dynamics by analyzing its number of enrolled students, which reached 14,356 in the latest quarter. Over the last two years, Lincoln Educational’s enrolled students averaged 9.4% year-on-year growth. Because this number is lower than its revenue growth during the same period, we can see the company’s monetization has risen.

This quarter, Lincoln Educational reported year-on-year revenue growth of 13.2%, and its $116.5 million of revenue exceeded Wall Street’s estimates by 0.5%.

Looking ahead, sell-side analysts expect revenue to grow 9.5% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will see some demand headwinds.

Lincoln Educational’s operating margin has been trending up over the last 12 months and averaged 3.7% over the last two years. The company’s higher efficiency is a breath of fresh air, but its suboptimal cost structure means it still sports lousy profitability for a consumer discretionary business.

This quarter, Lincoln Educational generated an operating margin profit margin of 2.5%, up 3.6 percentage points year on year. This increase was a welcome development and shows it was more efficient.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Lincoln Educational’s EPS grew at an unimpressive 7.5% compounded annual growth rate over the last five years, lower than its 10.9% annualized revenue growth. However, its operating margin didn’t change during this time, telling us that non-fundamental factors such as interest and taxes affected its ultimate earnings.

In Q2, Lincoln Educational reported EPS at $0.05, up from negative $0.02 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Lincoln Educational to perform poorly. Analysts forecast its full-year EPS of $0.46 will hit $0.46.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Over the last two years, Lincoln Educational’s demanding reinvestments to stay relevant have drained its resources, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 11.4%, meaning it lit $11.42 of cash on fire for every $100 in revenue.

Lincoln Educational burned through $29.59 million of cash in Q2, equivalent to a negative 25.4% margin. The company’s cash burn increased from $2.71 million of lost cash in the same quarter last year.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although Lincoln Educational hasn’t been the highest-quality company lately, it found a few growth initiatives in the past that worked out wonderfully. Its five-year average ROIC was 34%, splendid for a consumer discretionary business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Lincoln Educational’s ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Lincoln Educational reported $16.7 million of cash and $178.4 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $50.61 million of EBITDA over the last 12 months, we view Lincoln Educational’s 3.2× net-debt-to-EBITDA ratio as safe. We also see its $1.09 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Lincoln Educational blew past analysts’ EPS expectations this quarter. We were also glad its EBITDA outperformed Wall Street’s estimates. On the other hand, its number of enrolled students missed. Overall, we think this was still a solid quarter with some key areas of upside. The stock traded up 3.4% to $24.55 immediately following the results.

Updated: November 8, 2025 at 9:53 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

Lincoln Educational doesn’t pass our quality test. To kick things off, its revenue growth was uninspiring over the last five years, and analysts don’t see anything changing over the next 12 months. And while its stellar ROIC suggests it has been a well-run company historically, the downside is its cash burn raises the question of whether it can sustainably maintain growth. On top of that, its operating margins reveal poor profitability compared to other consumer discretionary companies.

Lincoln Educational’s P/E ratio based on the next 12 months is 24.1x. While this valuation is reasonable, we don’t see a big opportunity at the moment. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $26.20 on the company (compared to the current share price of $18.63).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.