Stride Stock Trading at Discount: Can Margin Expansion Support Long-Term Growth?

Stride, Inc. LRN is currently trading at a notable valuation discount compared to peers in the K-12 and career education space. With a forward 12-month P/E ratio of 7.64, the stock trades well below Strategic Education, Inc. STRA at 12.47 and American Public Education, Inc. APEI at 16.95, suggesting potential upside if operational challenges are resolved. Yet beneath this attractive entry point lies a compelling profitability story driven by disciplined cost management rather than revenue growth.

Operational Leverage Emerging Despite Revenue Headwinds

Despite a stagnant revenue per pupil environment, Stride has demonstrated impressive margin expansion in fiscal 2026’s first quarter. Adjusted operating margin reached 13.1%, up 250 basis points year over year, while adjusted EBITDA margin expanded by 230 basis points to 17.5%. More importantly, adjusted EPS climbed to $1.52 from $1.09 in the prior-year quarter—a 39% increase that underscores the company’s ability to translate stable enrollment into bottom-line growth through operational efficiency.

This margin performance signals that Stride is successfully decoupling profitability from top-line growth. Rather than relying on pricing power or incremental revenue per pupil, the company has engineered operating leverage through tighter cost discipline. The metric that best captures this is SG&A expense, which declined 270 basis points year over year as a percentage of revenue, driven primarily by improved bad debt management and enhanced scale leverage.

The Revenue Per Pupil Challenge: A Temporary or Structural Issue?

Management’s guidance for fiscal 2026 projects revenue per enrollment to remain roughly flat year over year at approximately $9,677—a disappointing signal for growth investors but manageable within Stride’s margin-focused strategy. Multiple factors are constraining per-pupil upside: unfavorable state funding mix, timing dynamics, and notably, the absence of prior-year enrollment catch-up tailwinds that previously boosted efficiency metrics.

The more pressing near-term headwind stems from platform implementation issues that have driven higher student withdrawals and limited new enrollment momentum. Management now expects 10,000-15,000 fewer enrollments in fiscal 2026 due to these technical complications. However, this challenge appears transitional rather than permanent. Once systems stabilize and enrollment quality improves, the company’s disciplined margin framework could resume driving shareholder value without waiting for per-pupil revenue expansion.

Valuation, Analyst Sentiment, and Near-Term Catalysts

Analyst estimates for Stride have moved higher over the past month, reflecting optimism that the company will successfully execute its platform remediation efforts. Fiscal 2026 earnings estimates imply 3.1% year-over-year improvement, while fiscal 2027 estimates suggest 8.6% growth. This modest but steady earnings trajectory, combined with the stock’s recent 6.3% gain (outpacing the Zacks Schools industry and broader Consumer Discretionary sector), suggests the market is gradually pricing in recovery.

The discounted valuation remains noteworthy: LRN’s 7.64 forward P/E trades at roughly 40% of STRA and 45% of APEI, offering risk-adjusted upside if Stride can stabilize enrollment and demonstrate that its margin expansion is sustainable. The company currently carries a Zacks Rank #2 (Buy) rating, reflecting conviction among analysts that platform normalization and operational leverage justify the current discount.

Conclusion: Margin Discipline as the Primary Value Driver

Stride’s story is ultimately one of operational excellence compensating for revenue stagnation. While flat revenue per pupil appears concerning in isolation, the company’s 250+ basis point margin expansion, coupled with significant EPS growth, demonstrates that shareholder value creation doesn’t require pricing power in every cycle. Disciplined cost management and enrollment growth—rather than per-student pricing or external funding tailwinds—are doing the heavy lifting. Once platform issues are resolved, Stride’s margin-first approach and discounted valuation position the stock as a compelling opportunity for value-oriented investors.