Grand Canyon Education (LOPE)

Higher education company Grand Canyon Education (NASDAQ:LOPE) met Wall Streets revenue expectations in Q3 CY2025, with sales up 9.6% year on year to $261.1 million. The company expects next quarter’s revenue to be around $307.5 million, close to analysts’ estimates. Its GAAP profit of $0.58 per share was 66.3% below analysts’ consensus estimates.

Company Overview

Founded in 1949, Grand Canyon Education (NASDAQ:LOPE) is an educational services provider known for its operation at Grand Canyon University.

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.

Grand Canyon Education primary competitors include Apollo Global Management (NYSE:APO), Laureate Education (NASDAQ:LAUR), Strayer Education (NASDAQ:STRA), Capella Education (owned by Strategic Education NASDAQ:STRA), and American Public Education (NASDAQ:APEI).

A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Grand Canyon Education’s sales grew at a sluggish 5.9% compounded annual growth rate over the last five years. This wasn’t a great result compared to the rest of the consumer discretionary sector, but there are still things to like about Grand Canyon Education.

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. Grand Canyon Education’s annualized revenue growth of 7.6% over the last two years is above its five-year trend, but we were still disappointed by the results.

Grand Canyon Education also discloses its number of students, which reached 132,486 in the latest quarter. Over the last two years, Grand Canyon Education’s students averaged 6.2% year-on-year growth. Because this number aligns with its revenue growth during the same period, we can see the company’s monetization was fairly consistent.

This quarter, Grand Canyon Education grew its revenue by 9.6% year on year, and its $261.1 million of revenue was in line with Wall Street’s estimates. Company management is currently guiding for a 5.1% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 6.5% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and indicates its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Grand Canyon Education’s operating margin has shrunk over the last 12 months, but it still averaged 25.2% over the last two years, elite for a consumer discretionary business. This shows it’s an well-run company with an efficient cost structure, and we wouldn’t weigh the short-term trend too heavily.

This quarter, Grand Canyon Education generated an operating margin profit margin of 6.9%, down 13.3 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Grand Canyon Education’s unimpressive 7.4% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

In Q3, Grand Canyon Education reported EPS of $0.58, down from $1.42 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Grand Canyon Education’s full-year EPS of $7.42 to grow 26.1%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Grand Canyon Education has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the consumer discretionary sector, averaging 22.5% over the last two years.

Grand Canyon Education burned through $58.3 million of cash in Q3, equivalent to a negative 22.3% margin. The company’s cash burn was similar to its $38.95 million of lost cash in the same quarter last year. These numbers deviate from its longer-term margin, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings.

Over the next year, analysts predict Grand Canyon Education’s cash conversion will slightly improve. Their consensus estimates imply its free cash flow margin of 22.2% for the last 12 months will increase to 23.9%, giving it more flexibility for investments, share buybacks, and dividends.

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).

Grand Canyon Education’s five-year average ROIC was 33.4%, placing it among the best consumer discretionary companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.

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. Grand Canyon Education’s ROIC has increased over the last few years. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.

One of the best ways to mitigate bankruptcy risk is to hold more cash than debt.

Grand Canyon Education is a profitable, well-capitalized company with $277 million of cash and $110.5 million of debt on its balance sheet. This $166.4 million net cash position is 3.2% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

It was encouraging to see Grand Canyon Education beat analysts’ EBITDA expectations this quarter. On the other hand, its full-year EPS guidance missed and its number of students fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 1.9% to $174.72 immediately following the results.

Updated: December 4, 2025 at 9:58 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Grand Canyon Education.

We cheer for all companies serving everyday consumers, but in the case of Grand Canyon Education, we’ll be cheering from the sidelines. To begin with, its revenue growth was weak over the last five years, and analysts don’t see anything changing over the next 12 months. On top of that, Grand Canyon Education’s number of students has disappointed, and its Forecasted free cash flow margin suggests the company will have more capital to invest or return to shareholders next year.

Grand Canyon Education’s P/E ratio based on the next 12 months is 16x. This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $231 on the company (compared to the current share price of $155.73).

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.