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Strategic Education, Inc. (STRA) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Strategic Education, Inc. (STRA)

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Intrinsic Value (DCF)

Current$84.52
→
Intrinsic$97.34
+15%
$66.76$97.34$155.47
Market implies 5% growth for 5 years
STRA shows 15% potential upside using 8% growth — reasonable if fundamentals hold.
At $85, the market prices in only 5% growth — below historical 8%, suggesting low expectations.
Range: Bear $67 → Bull $155. Current price implies expectations below the base case, but well above the bear case.
Discount ↓Growth →4%6%8%10%
8%$115$126$137$149
10%$82$90$97$106
12%$64$70$75$82
14%$52$57$61$66

Bull Case

  • Bull case ($155) offers 84% upside at 10% growth, 9% discount
  • 13% margin of safety vs. base case estimate
  • Market-implied growth (5%) ≤ historical CAGR (8%)

Bear Case

  • Bear case ($67) implies 21% downside at 6% growth, 12% discount
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5-Year Free Cash Flow Projection

Year 1$139.05M
Year 2$150.18M
Year 3$162.19M
Year 4$175.16M
Year 5$189.18M
Terminal$2.78B

📐 Model Inputs

Growth Rate8.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$128.75MTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is STRA stock undervalued or overvalued?
🟡 FAIRLY VALUED

STRA trades at $84.52, within 10% of our $97.34 intrinsic value estimate. At 10.0% WACC and 8.0% FCF growth, the market is pricing in assumptions roughly aligned with the 5-year historical CAGR. The valuation range spans $70.65 (bear) to $133.03 (bull).

What is STRA's intrinsic value?

Using a 5-year DCF model: Base FCF of $129M, projected at 8.0% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $-12M net debt and dividing by 0.02B shares: Bear $70.65 | Base $97.34 | Bull $133.03. Current price $84.52 implies +14% to base case.

How is STRA's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 8.0% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($2.34B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 18.2x.