Scholastic (SCHL)

Educational publishing and media company Scholastic (NASDAQ:SCHL) missed Wall Street’s revenue expectations in Q4 CY2025 as sales only rose 1.2% year on year to $551.1 million. Its non-GAAP profit of $2.57 per share was 24.2% above analysts’ consensus estimates.

Company Overview

Creator of the legendary Scholastic Book Fair, Scholastic (NASDAQ:SCHL) is an international company specializing in children's publishing, education, and media services.

The advent of the internet changed how shows, films, music, and overall information flow. As a result, many media companies now face secular headwinds as attention shifts online. Some have made concerted efforts to adapt by introducing digital subscriptions, podcasts, and streaming platforms. Time will tell if their strategies succeed and which companies will emerge as the long-term winners.

Competitors in the publishing industry include John Wiley & Sons (NYSE:JW.A), Disney (NYSE:DIS), and The New York Times (NYSE:NYT).

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, Scholastic’s 4.9% annualized revenue growth over the last five years was weak. This fell short of our benchmark for the consumer discretionary sector and is a tough starting point for our analysis.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Scholastic’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

This quarter, Scholastic’s revenue grew by 1.2% year on year to $551.1 million, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 3.2% over the next 12 months. While this projection indicates its newer products and services will catalyze better top-line performance, it is still below average for the sector.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Scholastic’s operating margin has been trending up over the last 12 months and averaged 1.6% 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 inadequate profitability for a consumer discretionary business.

In Q4, Scholastic generated an operating margin profit margin of 15%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Scholastic broke even from a free cash flow perspective over the last two years, giving the company limited opportunities to return capital to shareholders.

Scholastic’s free cash flow clocked in at $59.2 million in Q4, equivalent to a 10.7% margin. This result was good as its margin was 3 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends trump fluctuations.

Scholastic reported $99.3 million of cash and $280.6 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 $164 million of EBITDA over the last 12 months, we view Scholastic’s 1.1× net-debt-to-EBITDA ratio as safe. We also see its $18.1 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.

It was good to see Scholastic beat analysts’ EPS expectations this quarter. We were also happy its EBITDA outperformed Wall Street’s estimates. On the other hand, its full-year EBITDA guidance missed and its revenue fell slightly short of Wall Street’s estimates. Zooming out, we think this was a mixed quarter. The stock remained flat at $29.15 immediately after reporting.

Updated: December 18, 2025 at 10:07 PM EST

Are you wondering whether to buy Scholastic or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Scholastic doesn’t pass our quality test. To begin with, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its projected EPS for the next year implies the company will start generating shareholder value, the downside is its relatively low ROIC suggests management has struggled to find compelling investment opportunities. On top of that, its low free cash flow margins give it little breathing room.

Scholastic’s P/E ratio based on the next 12 months is 17.4x. 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 $36 on the company (compared to the current share price of $28.59).

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.