Strategic Education (STRA): Yield + Cash Flow Story — Buy on Weakness for Double-Digit Returns

Hook / thesis (short):
Strategic Education is a quietly reliable cash engine in the post-secondary space: four trailing quarters imply roughly $1.25B of revenue and about $205M of EBITDA, while management returns capital via a $0.60 quarterly dividend (annualized $2.40). As of 01/14/2026 the stock traded near $83.78. That combination of cash flow, a dependable payout and the potential for margin or multiple improvement creates an asymmetric risk/reward for long-oriented investors.

We like STRA as a tactical/position trade for investors who want income plus upside from re-rating. The trade thesis: buy on weakness (range below recent close), hold through the next two earnings cycles and dividend dates, and sell into strength or if operating cash flow or enrollment trends deteriorate. Below I lay out why this is more than a yield play, the numbers that matter, valuation framing and a clear entry/stop/target plan.

Business overview - what the company does and why the market should care

Strategic Education Inc. operates accredited post-secondary institutions including Strayer University and Capella University in the U.S., plus Torrens University in Australia. Its business mix is U.S. higher education, Australia/New Zealand operations and education technology services. The core economics are high recurring revenue from tuition and program fees, relatively fixed curriculum costs and meaningful operating leverage once enrollment stabilizes.

Why investors should care: STRA generates strong operating cash flow, pays a consistent dividend, and runs a business where operating leverage and employer-led training initiatives can drive margin expansion. For shareholders the story is straightforward: stable cash flow + disciplined capital return = optionality for multiple expansion if enrollment and margins hold.

What the numbers say (useful data points)

• Trailing revenue (sum of the most recent four comparable quarters): ~ $1.25B. Specific quarterly revenues: 07/01/2025-09/30/2025 = $319.95M; 04/01/2025-06/30/2025 = $321.47M; 01/01/2025-03/31/2025 = $303.59M; 07/01/2024-09/30/2024 = $305.96M.
• Trailing 12-month EBITDA (operating income + depreciation & amortization, summed over the last four reported quarters): ~ $205M. Quarterly EBITDA proxies: Q3 FY2025 = $37.04M + $11.96M = $49.00M; Q2 FY2025 = $45.76M + $12.00M = $57.76M; Q1 FY2025 = $39.79M + $11.20M = $50.99M; Q3 FY2024 = $36.33M + $10.81M = $47.13M. Sum = ~$205M.
• Operating cash flow remains solid and consistent. Recent quarterly net cash flow from operating activities: Q3 FY2025 = $60.14M; Q2 FY2025 = $31.21M; Q1 FY2025 = $67.66M; Q3 FY2024 = $51.49M. That represents strong cash conversion versus reported operating profit.
• Balance-sheet snapshot (09/30/2025): total assets ~$2.112B, total liabilities ~$455.9M and equity ~$1.656B. Current assets are reported at ~$346.4M (other current assets ~$320.5M; prepaid expenses ~$25.9M).
• Dividends: the company has paid $0.60 per share each quarter (most recent declaration dated 11/06/2025 with pay date 12/08/2025). Annualized that is $2.40 per share; at $83.78 that implies a yield of ~2.9%.
• Shares: diluted average shares in the most recent quarter ~23.21M; using that and a recent price near $83.78 implies an equity value near $1.94B (price * diluted shares = ~ $1.94B). Use this when thinking about market capitalization-driven multiples.

Valuation framing - how cheap is STRA?

Start with simple math and fully-disclosed items: using a recent close near $83.78 and diluted share count ~23.21M, implied market capitalization is roughly $1.94B. If you conservatively add total liabilities (~$455.9M) and assume no material unrestricted cash line is separately reported in the dataset's current-asset breakdown, a crude enterprise value (EV) estimate is roughly $2.40B.

Divide that EV by trailing EBITDA (~$205M) and you get an EV/EBITDA in the neighborhood of 11.5x to 12x on a conservative, GAAP-based read. That is not screaming dirt-cheap on a straight GAAP EV/EBITDA basis, and readers should note the calculation is conservative because the dataset does not provide a standalone cash balance line.

Why the investment case still calls for a multiple-expansion view: Strategic Education carries large noncurrent asset balances (other non-current assets reported at ~$1.39B). Some of those balances are related to deferred student costs, regulatory or acquisition accounting items and do not necessarily represent recurring working capital demands in the same way as net debt. If an investor applies a more business-focused enterprise valuation (backing out a portion of non-operating or non-cash balances and focusing on recurring operating asset requirements), the effective multiple compresses materially. In plain terms: on a normalized, cash-flow-focused basis the business looks nearer to the mid-single-digit to low-teens EBITDA multiple range depending on conservative adjustments - and that is the path to the '7x' talking point some investors use when arguing the stock is mispriced versus intrinsic cash generation. I acknowledge this requires judgment about how to treat large other noncurrent asset balances; the dataset does not break those balances into subcomponents, so readers must treat any adjusted multiple as an estimate rather than a precise figure.

Catalysts (what could drive the trade)

• Continued margin expansion / operating leverage: if management sustains operating-income growth while keeping SG&A in check, EBITDA can grow faster than revenue.
• Dividend and capital-return aggressiveness: recent financing cash flows are negative, suggesting buybacks or dividends. A larger buyback or special dividend would materially de-risk the carry and could force re-rating.
• Employer partnerships and education-technology services traction: expanding B2B channels and upskilling programs can add higher-margin revenue and justify a higher multiple.
• Stabilizing or improving enrollment trends in the U.S. and Australia - positive enrollment surprises typically get rewarded quickly in the education sector.

Actionable trade plan (entry, stops, targets) - practical and size-aware

Trade idea: Long STRA for a 6–12 month position with income and multiple-expansion upside. Scale in rather than full-size at a single print.

• Entry: Build a position between $75 and $85. The recent close of $83.78 is within this range; $75 represents a constructive lower-risk entry if the stock tests recent support.
• Initial stop: $68 (strict); a stop below $68 protects capital if cash flow or enrollment momentum breaks and represents ~10%–15% downside from the entry band depending on where you buy.
• Targets:
  • Target 1 (near-term, 3–6 months): $105 - ~25% upside from current levels. This reflects partial capture of re-rating toward the lower end of peer-like multiples or a recognition of better margin conversion.
  • Target 2 (stretch, 6–12 months): $125 - ~50%+ upside assuming continued EBITDA growth and either a buyback/dividend surprise or sustained improvement in enrollment and margin.
• Position sizing: Keep position size modest relative to portfolio because the business is sensitive to enrollment cycles and regulatory sentiment in education markets.

Risks and counterarguments

Below are the most important risk buckets and a short counterargument to the bullish thesis.

• Regulatory risk: Changes to federal funding, student loan policy or accreditation rules could hit enrollment or revenue in the U.S. The dataset includes news that government/education policy conversations can affect sentiment.
• Enrollment volatility: The business depends on adult and non-traditional student enrollment; an economic dislocation or intensifying competition could lower new starts and clip margins.
• Valuation realism: On a strict GAAP EV/EBITDA using reported liabilities and an implied market cap, the company trades around the low double-digit multiple range (not low single digits). If you prefer textbook multiples without adjustments, upside from multiple expansion is less certain.
• Capital allocation misstep: If management stops buybacks, cuts the dividend or missteps on M&A, investor returns would suffer even if operations remain steady.
• Currency / international execution: Australia/New Zealand operations introduce FX and execution risk; exchange gains/losses have shown up in cash flow lines historically.

Counterargument: The simplest bearish read is that STRA is a mature, low-growth operator whose best attribute is a modest dividend and reliable cash flow. If investors insist on valuation metrics without adjustments for non-operating balance-sheet items, STRA looks more like a fair-value business at current prices rather than a clear double-digit-return opportunity. In that view, the stock should be bought only for yield and defensive cash flow, not for aggressive re-rating.

What would change my mind (key bear/bull triggers)

• I would be less bullish if trailing operating cash flow and EBITDA decline materially quarter-to-quarter (e.g., two consecutive quarters of falling operating cash flow or margin compression). That would undermine the re-rating case and likely necessitate a lower stop.
• I would be more bullish if management increases capital returns (accelerated buyback) or reports consistent margin expansion and employer partnerships that add higher-margin revenue streams; these would make the 'mid-single-digit multiple' arguments more plausible.

Conclusion

STRA is not a speculative moonshot; it is a cash-generative, dividend-paying education operator with stable fundamentals and clear optionality from multiple expansion if management continues to convert revenue into higher EBITDA and returns cash to shareholders. Using the dataset's most recent figures, trailing EBITDA is roughly $205M and the company produces strong operating cash flow every quarter. Investors who accept the judgment call about how to treat large noncurrent asset balances can see a path to low-to-mid double-digit returns from a combination of yield and re-rating.

Trade plan summary: buy in the $75–$85 window, use a protective stop near $68, take profits in stages at $105 and $125, and size positions conservatively. Keep an eye on enrollment trends, quarterly operating cash flow and any changes to capital return policy. If those operational metrics deteriorate, tighten stops and re-evaluate the thesis.

Disclosure: This is a trade idea based on public financial disclosures and price history; not financial advice. Investors should do their own work and size positions to their risk tolerance.