Stride Stock is Trading at a Premium to the Industry: Buy or Hold?

Stride, Inc. LRN is currently trading at a premium compared with the Schools industry peers but is undervalued in contrast to the broader Consumer Discretionary sector. The company’s forward 12-month price-to-earnings (P/E) ratio is 15.98, slightly above the industry average of 15.18 but below the sector’s valuation of 19.35.

This Virginia-based education company’s premium valuation lies in the robust prospects driven by several internal and external factors. The market shift toward virtual education alternatives, AI-based solutions and more career-focused programs is the primary driver of Stride’s growth trend. Being a diversified service provider, these tailwinds offer the company diversified revenue streams and the ability to manage profitability scale.

The overvaluation of LRN stock compared with its industry peers indicates its strong potential in the market, given the favorable trends supporting it. This trend justifies its Value Score of A.

LRN stock has trended upward 40.1% so far this year, outperforming the industry, the sector and the S&P 500 index. Although macroeconomic challenges, such as inflationary pressures and prospective changes in the education market, are concerning for LRN’s growth, the in-house strategies and favorable market shifts are mitigating the risk factors.

Let us dive deeper into understanding the factors that are keeping Stride on the move.

Moving Along With the Market Shifts

Amid market risks, Stride is witnessing meaningful gains from the shift in demand patterns among students and parents toward tech-based alternatives and career-focused programs. Owing to the market’s demand trends, the company is mainly focusing on making meaningful investments across all its programs, especially on the career platform. Due to the increased consideration of AI or AI-based tools, it is also gradually incorporating AI in its programs in a responsible and impactful manner. Its main focus is on the foundational areas and technologies that it can leverage for better customer outcomes and experiences.

LRN ended fiscal 2025 with an average enrollment growth of 20.4% year over year, with the General Education segment’s enrollment going up 13.2% and the same for the Career Learning segment increasing 32.5%. The company expects enrollment growth of between 10% and 15% year over year for the first quarter of fiscal 2026, positioning it well for fiscal 2026 and beyond.

Investments in Tutoring Services

Since 2022, Stride has been offering tutoring services through Stride Tutoring, which was then rebranded in 2024 as K12 Tutoring. As evidenced in fiscal 2025, its tutoring services are gaining traction with several states in the United States recognizing the importance of tutoring in shaping children throughout K-12 education. To enhance its offerings and increase demand patterns, LRN is currently engaged in integrating AI into its tutoring model as well.

Notably, on March 24, 2025, Stride’s K12 Tutoring collaborated with Lake Forest School District in Delaware to offer innovative and tailored educational solutions to students. This strategic transaction is another example highlighting Stride’s efforts in fueling its growth prospects through tutoring services. Currently, Stride is primarily focused on providing dedicated tutoring for all second and third-grade students, with a primary emphasis on the core skill of reading. This highlights the expansion of service offerings under the K-12 Tutoring model.

Attractive Liquidity Position

As of fiscal 2025, Stride had cash and cash equivalents of $782.5 million, up from $500.6 million as of fiscal 2024. Moreover, marketable securities as of the same period were $202.8 million, up from $191.7 million reported at the end of fiscal 2024. Long-term debt as of June 30, 2025, was $416.3 million, slightly up from $414.7 million as of fiscal 2024. Although the debt position inched up year over year, the company has sufficient liquidity to meet these obligations.

LRN focuses on a balanced capital allocation approach, with excess being utilized across organic business enhancements, inorganic strategies and returning value to its shareholders.

Earnings Estimate Revision of LRN

LRN’s earnings estimates for fiscal 2026 and 2027 have moved north over the past 30 days to $8.81 per share and $9.71 per share, respectively. The revised estimated figures for fiscal 2026 and 2027 imply year-over-year growth of 8.8% and 10.2%, respectively.

Analysts’ optimism regarding LRN stock has moved up owing to the favorable market trends and its ability to capitalize on its in-house efforts.

ROE Position of LRN Stock

Stride’s trailing 12-month return on equity (ROE) of 25.5% significantly exceeds the industry’s average of 6.03%, underscoring its efficiency in generating shareholder returns.

Stride’s Competition Position in the Education Market

Stride faces a dynamic competitive landscape as it expands its reach in online education, particularly against Coursera, Inc. COUR, Chegg, Inc. CHGG and Strategic Education, Inc. STRA.

Coursera’s model offers flexibility and global recognition, but Stride’s ability to integrate tutoring and support services across its portfolio has provided stickier enrollment growth, especially in career-oriented pathways. On the other hand, Strategic Education, with its established presence through Capella and Strayer, competes closely with Stride on adult learners, focusing on affordability and workforce-aligned programs. Lastly, Chegg operates a direct-to-consumer subscription model, offering digital study aids, homework assistance and increasingly, AI-driven tutoring for college and post-secondary learners.

Stride appears to hold a competitive edge in its integrated K-12 plus career learning model, which few others fully replicate, and in its growing traction in the adult skills market. That said, Coursera’s scale and academic brand, Chegg’s deep penetration in student support and Strategic Education’s degree credibility remain serious rivals.

Should You Include LRN Stock in Your Portfolio?

The premium valuation reflects Stride’s leadership in the online education market, driven by its diversified model spanning K-12, career learning and tutoring services. A robust enrollment growth story, new investments and efforts toward AI incorporation in its services are all considerable factors that an investor must take into account before making any decision.

Moreover, LRN’s ROE being above its industry peers and a stable liquidity showcase its flexibility for strategic investments and approach toward shareholder value. With analysts raising earnings estimates for fiscal 2026 and 2027, optimism around the company’s growth trajectory remains high.

Overall, the expanding market share and solid fundamentals make this Zacks Rank #2 (Buy) stock a decent portfolio inclusion option for investors. 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