Can Stride Inc Again Double From Here?

Quite possible! Consider this: with 40% EPS growth, high double-digits enrollment expansion, and operating margin exceeding 15%, Stride (NYSE:LRN) – a digital K-12 education company – is outpacing legacy early education and child care player Bright Horizons (NYSE:BFAM) in every meaningful metric. Yet, BFAM trades at around 30x EBIT while Stride sits at 16x. The market is recognizing it, which is why LRN has returned 120% in the last one year compared to a mere 5% for BFAM. 

Stride is growing faster, scaling cheaper, earning more – and still priced like a second-tier player. That’s the setup Wall Street loves to get wrong – until it doesn’t. You may want to buy LRN at the next dip but investing in a single stock, no matter how promising, is risky. If you want to diversify that risk while exposing yourself to strong upside, consider the High-Quality portfolio, which has outperformed the S&P 500 and achieved returns greater than 91% since inception.

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LRN Beats BFAM On Most Metrics

• LRN saw around 13% top line growth in last 12M vs 11% for BFAM
• Has 15% operating margin vs < 10% for BFAM
• Has lower debt, and higher operational and free cash flow margins
• But is priced much cheaper as about 16x EBIT vs 30x for BFAM
• In addition, its quarterly EPS growth (yoy) accelerated in the recent quarter to 42% vs around 31% a year ago

If that’s not enough – consider this. Stride’s fully online model scales nationally without physical infrastructure drag, while BFAM’s childcare centers have to deal with rising labor and facility costs. And it’s not an isolated breakout – Grand Canyon Education (LOPE), another digital-first education play, is also seeing a surge in investor interest, validating the sector shift toward asset-light, high-margin education models.

Nevertheless, there always remains a meaningful risk when investing in a single, or just a handful of stocks. Consider the Trefis High Quality (HQ) Portfolio which, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.