Recent commentary on Strategic Education (STRA) focuses on a five year decline in earnings per share alongside revenue growth, subdued 4.3% domestic student expansion, and expectations for flat free cash flow margins. These factors raise questions about profitability momentum.

Over the past year, the share price has been relatively flat overall, with a 3.54% year to date share price return and a 16.28% decline in total shareholder return over twelve months. This suggests momentum has been fading despite recent short term moves.

If this cautious setup has you looking further afield in education and training, it could be a good moment to broaden your search with our 22 top founder-led companies.

With the shares around US$81.36 and estimates implying both an intrinsic discount and room to analyst targets, the question now is whether the recent weakness leaves upside on the table or if the market already reflects future growth.

Most Popular Narrative: 21.3% Undervalued

With Strategic Education shares at $81.36 against a most-followed fair value of $103.33, the current price sits well below that narrative estimate, which is built on detailed assumptions about growth, margins, and discount rates.

The Education Technology Services segment is experiencing significant growth, with revenue increasing by more than 30% in 2024, primarily through the Sophia Learning direct-to-consumer portal and expanding corporate partnerships, potentially boosting earnings. The company has a robust free cash flow, allowing it to continue shareholder returns through dividends and share repurchases, which could enhance earnings per share.

Curious what justifies a fair value well above today’s price? This narrative leans on steady top line expansion, higher profit margins, and a richer future earnings multiple. Want to see how those pieces fit together into that $103.33 figure and beyond?

Result: Fair Value of $103.33 (UNDERVALUED)

However, there are still pressure points here, including tighter regulation in Australia and New Zealand, as well as lower revenue per U.S. student as scholarships and employer programs expand.

Build Your Own Strategic Education Narrative

If you see the numbers differently or simply want to test your own assumptions, you can build a personalized view of STRA in just a few minutes, starting with Do it your way.

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Strategic Education.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.