STRIDE INC (NYSE:LRN) Emerges as a Top Affordable Growth Stock

In today's market environment, investors often seek a balance between growth potential and reasonable valuation, a strategy commonly referred to as Growth at a Reasonable Price (GARP). One way to find such opportunities is by using fundamental screening tools that assess stocks based on key financial metrics. An “Affordable Growth” screen, for example, filters for companies showing strong growth (with a growth rating above 7), good profitability and financial health, and a valuation that is not too high (valuation score above 5). This method tries to find stocks that offer good expansion prospects without the high prices often linked with high-growth companies.

STRIDE INC (NYSE:LRN), a technology-based education service provider, recently came from such a screen, pointing to its appealing fundamental profile. The company, which focuses on K-12 education and career learning services, shows a notable mix of growth momentum and reasonable pricing, backed by healthy profitability and a strong balance sheet.

Growth Path

A main part of the affordable growth strategy is finding companies with sustained and promising expansion. Stride does well in this area, getting a growth rating of 7. Key growth indicators include:

• Earnings Per Share (EPS) grew 28.91% over the past year, with a high average yearly growth rate of 58.07% over several years.
• Revenue increased by 17.90% in the most recent year, keeping an average yearly growth of 18.24%.
• Looking forward, EPS is estimated to grow by 22.40% yearly, while revenue is expected to increase by 9.06% per year.

Although future growth rates are a bit lower compared to past highs, they remain strong and well above industry averages, highlighting Stride’s ability to benefit from demand for digital and career-oriented education.

Valuation Attractiveness

The screen focuses on stocks that are not overvalued, and here, too, Stride is notable with a valuation rating of 6. While some traditional metrics suggest a mixed view, several factors point to reasonable pricing:

• A P/E ratio of 23.22 is below the industry average and in line with the S&P 500.
• The forward P/E of 17.67 is lower than 71.62% of industry peers.
• The company’s PEG ratio, which includes earnings growth, points to an appealing valuation given its growth path.
• Enterprise Value to EBITDA and Price/Free Cash Flow ratios also suggest Stride is priced well within its sector.

These metrics show a valuation that allows for growth without needing too much investor optimism, a main idea of the affordable growth method.

Profitability and Financial Health

Beyond growth and valuation, the screen requires good profitability and financial health, areas where Stride does very well. The company has a profitability rating of 9, driven by:

• Strong return metrics, including Return on Assets (12.55%), Return on Equity (19.46%), and Return on Invested Capital (15.98%), all ranking in the top parts of the industry.
• Getting better margins, with operating margin at 17.44% and profit margin at 11.97%, reflecting efficient operations and pricing strength.

Financial health is equally strong, with a rating of 8 supported by:

• High liquidity, shown by current and quick ratios above 5, indicating plenty of short-term financial flexibility.
• Low debt levels, with a debt-to-equity ratio of 0.31 and a strong Altman-Z score of 7.36, signaling very little bankruptcy risk.
• A healthy debt-to-free-cash-flow ratio of 1.35, showing the company can quickly pay back obligations.

These factors not only lower investment risk but also give Stride the stability to keep investing in growth projects.

Conclusion

Stride Inc is a good example of a stock that fits with the affordable growth investment strategy. It mixes above-average growth rates with a reasonable valuation, all while keeping excellent profitability and a solid financial base. For investors looking for exposure to the education technology sector without paying too much for growth, LRN offers a balanced opportunity.

For readers interested in looking at similar investment candidates, more results from the Affordable Growth screen can be found here. A detailed fundamental analysis report for Stride is also available for more review.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own research and consult with a financial advisor before making any investment decisions.