Can Stride's Margin Focus Outweigh Its Flat Revenue Per Pupil?

Stride, Inc. LRN has been prioritizing margin expansion and operational discipline amid in-house technical issues and a flat year-over-year revenue per enrollment. This education service provider exited the first quarter of fiscal 2026 with an adjusted operating margin of 13.1%, up 250 basis points (bps) year over year, and an adjusted EBITDA margin of 17.5%, up 230 bps. Moreover, adjusted earnings per share (EPS) of $1.52 (compared with $1.09 in the year-ago quarter) substantiates the company’s meaningful operating leverage, driven by enrollment growth and tighter cost control rather than pricing or funding tailwinds. This performance highlights its ability to extract profitability even in a challenging operating environment.

Notably, the management acknowledged that revenue per enrollment is likely to exit fiscal 2026 being roughly flat year over year, around $9,677. While the overall funding environment remains positive, state mix, timing effects and the absence of prior-year in-year enrollment catch-ups are expected to limit per-pupil upside. Besides, the platform implementation issues led to higher withdrawals and constrained incremental enrollment, further dampening near-term revenue efficiency. Due to the technical glitches, the management now expects 10,000-15,000 fewer enrollments in fiscal 2026.

However, despite these headwinds, Stride’s margin story remains compelling. The selling, general and administrative (SG&A) expense growth continues to trail revenue growth, and it expects SG&A as a percentage of revenues to decline in fiscal 2026. The metric was down 270 bps year over year in the first quarter of fiscal 2026, mainly due to a decline in bad debt expense and increased top-line leverage.

Overall, flat revenue per enrollment (or pupil) does not necessarily equate to weak fundamentals. If the platform issues are resolved and enrollment quality improves, Stride’s margin-first approach could prove sustainable. Its ability to translate stable funding into expanding operating income suggests that disciplined execution, rather than per-student pricing growth, may be the primary driver of shareholder value in the near term.

Earnings Estimate Revision of LRN

LRN’s earnings estimates for fiscal 2026 and fiscal 2027 have moved north in the past 30 days. The analysts’ optimism is expected to have been boosted by the ongoing recovery efforts undertaken by the firm to fix its near-term issues and maintain the growth trend through a diversified portfolio.

The estimated figures for fiscal 2026 and fiscal 2027 imply year-over-year improvements of 3.1% and 8.6%, respectively.

Stride Stock’s Price Performance vs. Other Market Players

Shares of this Virginia-based education company have gained 6.3% in the past month, outperforming the Zacks Schools industry, the broader Zacks Consumer Discretionary sector and the S&P 500 Index.

Notably, firms like Strategic Education, Inc. STRA and American Public Education, Inc. APEI offer substantial competition to Stride in the career learning and K-12 services field. In the past month, shares of Strategic Education and American Public Education have gained 3.3% and 6.5%, respectively.

LRN’s Discounted Valuation

LRN stock is currently trading at a discount compared with its industry peers, with a forward 12-month price-to-earnings (P/E) ratio of 7.64, as shown in the chart below.

Notably, Strategic Education and American Public Education are currently trading at a forward 12-month P/E ratio of 12.47 and 16.95, respectively.

Stride stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

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