Will Low Marketing Spend Limit Stride's Enrollment Upside?

Stride, Inc. LRN has been witnessing enrollment growth over the past few years, fueled by positive market sentiments for online education alternatives and career learning programs alongside its in-house efforts toward diversified offerings. During the first nine months of fiscal 2025, total enrollment grew 20% year over year to about 233,500.

The company’s enrollment trends kept moving up despite its limitations on its marketing spend, reflecting the growing demand for its diversified program offerings, ranging from K-12 to career-learning, amid a favorable market backdrop. During the third quarter of fiscal 2025 earnings call, Stride highlighted this favorable aspect, hinting that it is well-positioned for long-term growth.

Currently, the company is focusing on several ways of strategic marketing that aim to expand its brand visibility while ensuring margin growth. It is testing several creative and approachable marketing pathways, including social media platforms, to spread awareness about its programs and expand market share. LRN is prioritizing to continue testing new methods, optimizing media placement, testing its messaging strategies and improving them. The primary aim of the company is to limit its marketing expenses and seek ways to more efficiently capitalize on its marketing spend.

During the first nine months of fiscal 2025, Stride’s selling, general and administrative expenses (as a percentage of total revenues) contracted 360 basis points year over year to 22.9%. Thus, with the ongoing robust market trends alongside the current regulatory reform trends in the United States education industry, LRN’s enrollment prospects seem bright for the upcoming period.

LRN Stock’s Price Performance vs Other Market Players

Shares of this Virginia-based education company have trended upward 31.1% so far this year, outperforming the Zacks Schools industry, the broader Zacks Consumer Discretionary sector and the S&P 500 index.

Sharing space with LRN, other education firms, including Chegg, Inc. CHGG and Grand Canyon Education, Inc. LOPE, seems to be benefiting from the favorable market demand backdrop and long-term positive funding environment in the United States. However, they are likely to be falling behind in capitalizing on the opportunities in comparison with Stride. In the year-to-date period, the share price performance of Chegg tumbled 17.4%, while that of Grand Canyon Education has gained 7.7%.

Stride’s Valuation Trend

Stride stock is currently trading at a discount compared with the industry peers, with a forward 12-month price-to-sales (P/S) ratio of 2.29X, as evidenced by the chart below. The discounted valuation of the stock compared with one of the mentioned renowned market players looks promising for investors.

Notably, Chegg and Grand Canyon Education are currently trading at a forward 12-month P/S ratio of 0.36X and 4.44X, respectively.

Earnings Estimate Revision of LRN

LRN’s earnings estimates for fiscal 2025 and 2026 have remained unchanged over the past 60 days at $7.09 and $7.76 per share, respectively. However, the estimated figures for fiscal 2025 and 2026 imply year-over-year growth of 51.2% and 9.4%, respectively.

EPS Trend

LRN stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research