Since January 2025, Stride has been in a holding pattern, posting a small return of 0.6% while floating around $128.69. The stock also fell short of the S&P 500’s 5.8% gain during that period.
Is now the time to buy LRN? Or does the price properly account for its business quality and fundamentals? Find out in our full research report, it’s free.
Why Are We Positive On LRN?
Formerly known as K12, Stride (NYSE: LRN) is an education technology company providing education solutions through digital platforms.
1. Growth in Enrollments Shows Increasing Demand
Revenue growth can be broken down into changes in price and volume (for companies like Stride, our preferred volume metric is enrollments). While both are important, the latter is the most critical to analyze because prices have a ceiling.
Stride’s enrollments punched in at 240,200 in the latest quarter, and over the last two years, averaged 11.7% year-on-year growth. This performance was impressive and shows its services have a unique value proposition.
2. Increasing Free Cash Flow Margin Juices Financials
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.
As you can see below, Stride’s margin expanded by 6 percentage points over the last five years. This is encouraging because it gives the company more optionality. Stride’s free cash flow margin for the trailing 12 months was 10.7%.
3. New Investments Bear Fruit as ROIC Jumps
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
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.
Final Judgment
These are just a few reasons why Stride is one of the best business services companies out there. With its shares lagging the market recently, the stock trades at 17.2× forward P/E (or $128.69 per share). Is now a good time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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