Stride (LRN)

Online education Stride (NYSE:LRN) reported Q4 CY2025 results beating Wall Street’s revenue expectations, with sales up 7.5% year on year to $631.3 million. Guidance for next quarter’s revenue was better than expected at $630 million at the midpoint, 1.9% above analysts’ estimates. Its non-GAAP profit of $2.50 per share was 7.8% above analysts’ consensus estimates.

Company Overview

Formerly known as K12, Stride (NYSE:LRN) is an education technology company providing education solutions through digital platforms.

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Stride’s primary competitors include Pearson PLC (NYSE:PSO), Chegg (NYSE:CHGG), Grand Canyon Education (NASDAQ:LOPE), 2U (NASDAQ:TWOU), and private companies Connections Academy and Edmentum.

A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.

With $2.52 billion in revenue over the past 12 months, Stride is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale. On the bright side, it can still flex high growth rates because it’s working from a smaller revenue base.

As you can see below, Stride’s 14.6% annualized revenue growth over the last five years was exceptional. This is a great starting point for our analysis because it shows Stride’s demand was higher than many business services companies.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Stride’s annualized revenue growth of 14% over the last two years aligns with its five-year trend, suggesting its demand was predictably strong.

This quarter, Stride reported year-on-year revenue growth of 7.5%, and its $631.3 million of revenue exceeded Wall Street’s estimates by 0.5%. Company management is currently guiding for a 2.7% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 2% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and implies its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.

Stride has managed its cost base well over the last five years. It demonstrated solid profitability for a business services business, producing an average operating margin of 12.1%.

Analyzing the trend in its profitability, Stride’s operating margin rose by 9.1 percentage points over the last five years, as its sales growth gave it immense operating leverage.

In Q4, Stride generated an operating margin profit margin of 23.3%, up 2 percentage points year on year. This increase was a welcome development and shows it was more efficient.

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.

Stride’s EPS grew at an astounding 46.4% compounded annual growth rate over the last five years, higher than its 14.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Stride’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Stride’s operating margin expanded by 9.1 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Stride, its two-year annual EPS growth of 45% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q4, Stride reported adjusted EPS of $2.50, up from $2.03 in the same quarter last year. This print beat analysts’ estimates by 7.8%. Over the next 12 months, Wall Street expects Stride’s full-year EPS of $8.33 to grow 2.7%.

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.

Stride has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company’s free cash flow margin averaged 9.2% over the last five years, quite impressive for a business services business.

Taking a step back, we can see that Stride’s margin dropped by 2.7 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

Stride’s free cash flow clocked in at $75.92 million in Q4, equivalent to a 12% margin. The company’s cash profitability regressed as it was 23.5 percentage points lower than in the same quarter last year, but it’s still above its five-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, leading to short-term swings. Long-term trends carry greater meaning.

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).

Stride’s five-year average ROIC was 18.6%, beating other business services companies by a wide margin. This illustrates its management team’s ability to invest in attractive growth opportunities 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. Over the last few years, Stride’s ROIC has increased significantly. 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.

Stride is a profitable, well-capitalized company with $625.7 million of cash and $556.3 million of debt on its balance sheet. This $69.45 million net cash position is 2.2% 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 great to see Stride’s revenue guidance for next quarter top analysts’ expectations. We were also glad its EPS outperformed Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock traded up 13.6% to $82.31 immediately after reporting.

Updated: January 27, 2026 at 9:02 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Stride, you should also grasp the company’s longer-term business quality and valuation.

Stride is an amazing business ranking highly on our list. For starters, its revenue growth was exceptional over the last five years. And while its projected EPS for the next year is lacking, its expanding adjusted operating margin shows the business has become more efficient. Additionally, Stride’s astounding EPS growth over the last five years shows its profits are trickling down to shareholders.

Stride’s P/E ratio based on the next 12 months is 8.4x. Analyzing the business services landscape today, Stride’s positive attributes shine bright. We think it’s one of the best businesses in our coverage and love the stock at this bargain price.

Wall Street analysts have a consensus one-year price target of $105 on the company (compared to the current share price of $98.50), implying they see 6.6% upside in buying Stride in the short term.