Stride, a Zacks Rank #1 (Strong Buy), is a technology-based education service company that engages in the provision of proprietary and third-party online curriculum, software systems, and educational services in the United States and internationally. The stock is displaying relative strength, breaking out to the upside over the past month amid a bullish move that pushed shares to new all-time highs.

The price movement is a sign of strength as we head deeper into the historically-positive fourth quarter. Increasing volume has attracted investor attention as buying pressure accumulates in this top-ranked stock.

Stride is part of the Zacks Schools industry group, which currently ranks in the top 5% out of more than 250 industries. Because this group is ranked in the top half of all Zacks Ranked Industries, we expect it to outperform the market over the next 3 to 6 months.

Also note the favorable metrics for this industry group below:

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Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top industries, we can dramatically improve our stock-picking success.

Company Description

Stride offers products and services that enable clients to attract, enroll, educate, and facilitate individualized learning for students. The company provides an integrated package of systems, services, and professional expertise to support a virtual or blended public school; software and services to schools and school districts; and individual online courses and supplemental educational products.

With a focus on general education including subjects such as math, English, science, and history for K-12 students, Stride also offers post-secondary career learning programs including training for software engineering, health care, and medical fields to adult learners. The company serves public and private schools, charter boards, consumers, employers, and government agencies.

Stride, which was formerly known as K12 Inc., was incorporated in 1999 and is headquartered in Reston, Virginia. It was named of the nation’s leading technology-based education companies by the 2024 BIG Awards for Business, highlighting the company’s commitment to delivering accessible, personalized, and career-centric virtual learning experiences.

Earnings Trends and Future Estimates

A premier education provider, Stride LRN has built up an impressive earnings history, surpassing earnings estimates in each of the past eight quarters. The company has delivered a trailing four-quarter average earnings beat of 100.8%.

Back in October, Stride reported third-quarter earnings of 94 cents per share, a 370% surprise over the $0.20/share consensus estimate. Revenues of $551.1 million also exceeded projections by 10.2%.

Analysts are bullish on the stock and have been raising earnings estimates across the board. The fourth-quarter consensus EPS estimate has been revised upward in the past 60 days by 19.4% to $1.97/share. If the company is able to achieve this, it would translate to a 27.9% growth rate versus the same quarter last year.

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Let’s Get Technical

This market leader has seen its stock advance more than 85% in 2024 alone. Only stocks that are in extremely powerful uptrends are able to experience this type of outperformance. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.

Image Source: StockCharts

Notice how both the 50-day (blue line) and 200-day (red line) moving averages are sloping up. The stock has been making a series of higher highs throughout the year. With both strong fundamental and technical indicators, LRN stock is poised to continue its outperformance.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Stride has recently witnessed positive revisions. As long as this trend remains intact (and LRN continues to deliver earnings beats), the stock will likely continue its bullish run.

Bottom Line

Backed by a leading industry group and history of earnings beats, it’s not difficult to see why Stride stock is a compelling investment. Robust fundamentals combined with an appealing technical trend certainly justify adding shares to the mix.

Recent positive earnings estimate revisions should also serve to create a ‘floor’ in terms of any sudden or unexpected downside moves. If you haven’t already done so, be sure to put LRN on your shortlist.

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