Last Update22 Oct 25
Narrative Update on Strategic Education
Analysts have increased their price target for Strategic Education from $88 to $94, citing stronger growth in Capella from targeted investments and employer enrollments. They also noted anticipated benefits from regulatory changes and operational efficiencies.
Analyst Commentary
Analyst perspectives on Strategic Education reflect a mix of confidence in recent progress and cautious attention to ongoing challenges. The following summarizes both bullish and bearish takeaways based on the latest research and commentary.
Bullish Takeaways
- Bullish analysts highlight the raised price target to $94 as a signal of confidence in the company's growth trajectory and valuation potential.
- Capella's enrollment and revenue growth continue to outpace Strayer, driven by targeted investment and an expanding employer partnership base.
- Regulatory changes introduced by the "One Big Beautiful Bill" are anticipated to have neutral or even positive effects. These changes may provide structural tailwinds for the business.
- Ongoing focus on operational efficiency, particularly by leveraging artificial intelligence and technology, supports management's goal of restoring operating margins to the low-to-mid-20% range.
Bearish Takeaways
- Bearish analysts note that Strayer still lags behind Capella in growth, signaling potential execution risks within certain segments of the business.
- The full impact of regulatory shifts remains uncertain. Any negative outcomes could hinder margin expansion or enrollment growth.
- Dependence on AI and technology efficiencies introduces risks if implementation falls short of expectations or if competitors advance more quickly in these areas.
- While margin improvement targets are ambitious, external factors such as macroeconomic conditions and enrollment volatility could challenge near-term results.
What's in the News
- From April 1, 2025 to June 30, 2025, Strategic Education repurchased 325,844 shares, representing 1.36% of its outstanding shares, for a total of $28.01 million (Key Developments).
- The company has completed the repurchase of 7,359,491 shares, which accounts for 50.67% of outstanding shares, under the buyback program announced on November 3, 2003. The total value of these repurchases is $836.29 million (Key Developments).
Valuation Changes
- Fair Value: Remained unchanged at $103.33 per share, indicating no revision in analysts' estimates of intrinsic value.
- Discount Rate: Decreased slightly from 7.13% to 7.11%, reflecting a minor reduction in the cost of capital assumptions.
- Revenue Growth: Essentially stable, moving marginally from 3.68% to 3.68%.
- Net Profit Margin: Held steady at approximately 13.90%, with negligible change from prior estimates.
- Future P/E: Decreased fractionally from 13.86x to 13.86x, which suggests valuation multiples are little changed in recent updates.
Key Takeaways
- Strong enrollment growth through corporate partnerships and education technology services could drive significant revenue and earnings increases.
- Robust free cash flow and disciplined cost management support improved net margins and enhance shareholder returns via dividends and share repurchases.
- New regulatory measures, increased scholarships, and economic factors may restrain growth, limit revenue, and strain profits despite strong enrollment and education technology growth.
Catalysts
About Strategic Education- Provides education services through campus-based and online post-secondary education, and programs to develop job-ready skills.
- Strategic Education is benefiting from strong enrollment growth, particularly through its corporate partnerships, which could drive continued revenue growth as employer-affiliated enrollment increased by 16% in 2024.
- 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 transition of the Best Buy partnership to an all-inclusive degree program at no cost to employees could lead to increased enrollment and revenue for the U.S. Higher Education segment.
- Strategic Education's disciplined cost management, leading to operating margin expansion by nearly 200 basis points, suggests the potential for improved net margins in the coming years.
- 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.
Strategic Education Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Strategic Education's revenue will grow by 4.7% annually over the next 3 years.
- Analysts assume that profit margins will increase from 9.2% today to 11.8% in 3 years time.
- Analysts expect earnings to reach $164.9 million (and earnings per share of $6.74) by about April 2028, up from $112.7 million today. The analysts are largely in agreement about this estimate.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 19.0x on those 2028 earnings, up from 16.9x today. This future PE is greater than the current PE for the US Consumer Services industry at 18.7x.
- Analysts expect the number of shares outstanding to decline by 0.43% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 6.56%, as per the Simply Wall St company report.
Strategic Education Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The potential impact of new regulatory measures in Australia/New Zealand, such as the government using visa processing times to effectively cap international student enrollment, could restrain growth in this segment and limit future revenue increases.
- Although U.S. Higher Education enrollment grew, the revenue per student might continue its decline due to increased scholarships and the shift toward employer-affiliated students, potentially impacting revenue growth.
- Higher operating expenses in the Education Technology Services (ETS) segment, despite strong revenue growth, may strain profit margins, especially as additional growth investments are required to maintain expansion.
- The reliance on corporate partnerships for U.S. enrollment makes the company vulnerable to changes in corporate strategy or economic downturns that might reduce employer-sponsored education programs, affecting enrollment figures and revenue.
- The competitive necessity to drive down overall education costs rather than increase tuition fees limits the revenue per student, impacting the ability to significantly expand revenue through price increases.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $112.333 for Strategic Education based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $120.0, and the most bearish reporting a price target of just $97.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.4 billion, earnings will come to $164.9 million, and it would be trading on a PE ratio of 19.0x, assuming you use a discount rate of 6.6%.
- Given the current share price of $78.73, the analyst price target of $112.33 is 29.9% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
How well do narratives help inform your perspective?
Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.