The Zacks Schools industry continues to navigate significant challenges in 2026, primarily stemming from increased regulatory oversight and uncertainties surrounding education funding. Changing federal and state regulations, stringent accountability standards under the Financial Value Transparency and Gainful Employment framework and evolving student-aid policies are raising compliance costs while complicating enrollment growth and program expansion. Meanwhile, escalating expenditures on marketing, student services, faculty hiring, technology modernization and specialized training facilities, coupled with broader inflationary pressures, are weighing on profitability. Uneven enrollment trends remain another concern, prompting education providers to continuously adjust their academic offerings to align with changing student preferences and labor-market demand.

Despite these challenges, the industry's medium-term outlook remains favorable. Persistent shortages of healthcare professionals and skilled-trade workers continue to drive demand for career-focused education, supporting enrollment growth and stronger employer partnerships. Demand for flexible online, hybrid and short-duration credential programs is expanding as working adults seek affordable pathways to upgrade their skills. Employer-sponsored education initiatives are improving enrollment visibility and career outcomes, while artificial intelligence and digital learning technologies are helping institutions enhance student engagement, retention and operating efficiency, supporting sustainable long-term growth. Companies like Laureate Education, Inc. (LAUR Quick QuoteLAUR - Free Report) , McGraw Hill, Inc. (MH Quick QuoteMH - Free Report) , Strategic Education, Inc. (STRA Quick QuoteSTRA - Free Report) , American Public Education, Inc. (APEI Quick QuoteAPEI - Free Report) and Lincoln Educational Services Corporation (LINC Quick QuoteLINC - Free Report) are gaining from these trends.

Industry Description

The Zacks Schools industry comprises for-profit education companies that offer undergraduate, graduate and specialized programs in finance, accounting, analytics, marketing, healthcare, business and technology. They are engaged in offering career-oriented programs in the fields of business and management, nursing, computer science, engineering, information systems and technology, project management, cybersecurity and criminal justice. The industry players also offer child-care services and career-oriented post-secondary courses. Some companies within the industry also provide yoga classes and yoga-related retail merchandise-integrated fitness classes, along with conducting workshops and teacher training programs.

4 Trends Shaping the Future of the School Industry

Regulatory Scrutiny and Funding Uncertainty Remain Risks: Regulatory oversight remains a key headwind for the U.S. for-profit education industry in 2026. Institutions continue to operate under evolving federal and state regulations, accreditation standards and financial-aid requirements, making expansion, new program launches and enrollment growth subject to lengthy approval processes. The Financial Value Transparency and Gainful Employment framework has increased reporting obligations and outcomes-based accountability, placing greater pressure on providers to demonstrate strong graduate earnings, completion rates and loan-repayment performance. Programs with weak outcomes risk heightened scrutiny and potential restrictions on access to federal student aid. Operators must also invest more in compliance systems, student support and career services, increasing operating costs and weighing on margins. Policy changes across administrations and uncertainty surrounding government funding and student-aid programs complicate long-term planning. As a result, regulation remains a structural industry headwind despite a somewhat more supportive policy environment.

Rising Student Acquisition Costs and Changing Search Patterns Pressure Margins: Growing competition for prospective students and shifting digital search behavior are creating challenges for the education industry. Increasing reliance on AI-powered search platforms is disrupting traditional recruitment channels, forcing institutions to strengthen digital visibility and invest in targeted marketing strategies. Rising advertising costs, higher student acquisition expenses and inconsistent enrollment conversion rates are adding pressure on profitability. Meanwhile, competition from public universities, community colleges, alternative training providers and employer-sponsored programs is intensifying enrollment challenges. Educational institutions must also increase spending on technology, digital infrastructure and student engagement platforms to remain competitive. Although these investments could improve recruitment efficiency and retention over time, near-term costs and uncertain returns may constrain operating margins.

Workforce-Oriented Education and Short-Term Credentials Drive Growth: Growing demand for career-focused education remains a key growth driver for the U.S. for-profit education industry in 2026. Students and employers are increasingly favoring practical skills, industry-recognized credentials and stronger employment outcomes. Rising demand for healthcare, nursing, allied health, skilled trades and technical training is creating opportunities for institutions offering specialized programs. Short-term courses, stackable credentials and flexible learning options are also gaining traction among working adults seeking career advancement. Per the National Student Clearinghouse, undergraduate certificate enrollment grew 10.2% in spring 2026, outpacing overall undergraduate enrollment growth of 1.3%. Additionally, Workforce Pell Grants, effective July 1, 2026, could expand access to approved short-term training programs, encouraging employer partnerships and industry-aligned offerings, subject to eligibility and performance requirements.

Digital Learning, AI Adoption and Employer Partnerships Support Growth: Growing adoption of online and hybrid learning models remains a key growth driver for the U.S. for-profit education industry. Flexible schedules, self-paced programs and remote instruction are attracting working professionals and adult learners while enabling institutions to expand their geographic reach with limited campus investments. Meanwhile, AI integration across academic advising, personalized learning, student engagement and administrative processes is creating opportunities to improve retention, enhance learning outcomes and reduce operating costs. Rising demand for AI-related skills, automation expertise and digital capabilities is also supporting enrollment in professional development and workforce reskilling programs. Additionally, employer-sponsored education, corporate training partnerships and industry-aligned credentials are expanding enrollment opportunities and reducing dependence on traditional student-funded programs. These partnerships can strengthen graduate employment prospects and generate recurring demand. However, realizing sustained benefits from AI adoption will depend on implementation expenses, student engagement and measurable improvements in educational and operational efficiency.

Zacks Industry Rank Indicates Dull Prospects

The Zacks Schools industry is a 19-stock group within the broader Zacks Consumer Discretionary sector. The industry currently carries a Zacks Industry Rank #194, which places it in the bottom 21% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bleak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of a lower earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential. Since August 2026, the industry’s earnings estimates for 2027 have decreased to $2.41 per share from $2.42.

Despite the industry’s blurred near-term view, we will present a few stocks that one may consider adding to their portfolio. Before that, it’s worth taking a look at the industry’s shareholder returns and current valuation.

Industry Outperforms Sector, Lags S&P 500

The Zacks Schools industry has lagged the Zacks S&P 500 Composite but performed better than the broader Zacks Consumer Discretionary sector over the past year.

Stocks in this industry have collectively lost 6.1% compared with the broader sector’s 15.7% decline. Meanwhile, the S&P 500 has risen 18.1% in the said period.

One-Year Price Performance

Industry's Current Valuation

On the basis of the forward 12-month price-to-earnings ratio, which is a commonly used multiple for valuing for-profit education stocks, the industry is currently trading at 10.89 compared with the S&P 500’s 19.99 and the sector’s 15.45.

Over the past five years, the industry has traded as high as 284.65, as low as 10.70 and at a median of 17.21, as the chart below shows.

Industry’s P/E Ratio (Forward 12-Month) Versus S&P 500

Industry’s P/E Ratio (Forward 12-Month) Versus Sector

5 School Stocks to Keep an Eye On

Below, we have discussed five stocks from the industry that have solid growth potential.

Strategic Education: Headquartered in Herndon, VA, Strategic Education provides campus-based and online higher education and job-focused skills training. The company is benefiting from strong demand for employer-sponsored education, supported by expanding corporate partnerships through Workforce Edge and growing enrollment in healthcare-focused programs. The continued expansion of nursing and other healthcare offerings at Capella University is strengthening its position in career-oriented education. Its Education Technology Services segment is gaining traction, driven by rising adoption of Sophia Learning’s flexible, affordable learning solutions and expanding corporate education benefits. Improving student retention, higher course participation and disciplined cost management are supporting operating efficiency and margins. Additionally, growing domestic enrollment, new academic programs and potential campus expansions in Australia offer longer-term growth opportunities.

STRA stock — currently carrying a Zacks Rank #2 (Buy) — has gained 1.6% over the past year. STRA has seen an upward estimate revision for 2026 earnings to $7.23 per share from $7.21 over the past 60 days. This company’s earnings for 2026 are expected to grow 17% on 2.7% higher revenues. STRA’s earnings topped the Zacks Consensus Estimate in two of the last four quarters and missed on the other two, with the average surprise being 9%. STRA’s three-to-five-year expected earnings per share growth rate is currently 15%. It also has a VGM Score of B.  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price and Consensus: STRA

Laureate Education: Headquartered in Miami, FL, this company provides higher education programs and services through institutions in Mexico, Peru and the United States. Laureate Education is benefiting from rising higher education participation rates in Mexico and Peru, alongside growing demand for flexible, fully online degree programs among working adults. Expansion of its campus network into underserved cities and high-growth markets, supported by a strong brand portfolio, offers additional enrollment opportunities. Investments in artificial intelligence, digital learning platforms and personalized student support are enhancing recruitment efficiency, improving student retention and strengthening academic outcomes. AI-driven marketing capabilities are also supporting market-share gains and lowering student acquisition costs. Additionally, operating efficiencies, centralized cost structures and favorable operating leverage are supporting margin expansion and profitability.

LAUR stock — currently carrying a Zacks Rank #3 (Hold) — has rallied 32.7% over the past year. LAUR has seen an upward estimate revision for 2026 earnings to $2.12 per share from $2.11 over the past 60 days. This company’s earnings for 2026 are expected to grow 23.3% on 13.4% higher revenues. LAUR’s three-to-five-year expected earnings per share growth rate is currently 15%. It also has a VGM Score of A.

Price and Consensus: LAUR

American Public Education: Based in Charles Town, WV, American Public Education delivers online and campus-based postsecondary education and career-focused learning across the United States. APEI is gaining from sustained demand for healthcare education, particularly pre-licensure nursing programs, supported by continued enrollment momentum and selective tuition increases. The company is expanding its campus network into attractive markets while pursuing institutional integration to unlock future cross-selling opportunities and broaden program availability. Growth is also supported by resilient demand from military personnel, veterans and military families, with particularly strong momentum in the latter two groups. Investments in marketing, technology modernization and new campus development, combined with a simplified operating structure and disciplined execution of its long-term strategy, are expected to strengthen enrollment, enhance scalability and support sustainable long-term expansion.  

APEI stock — currently carrying a Zacks Rank #3 — has gained 25.2% over the past year. APEI has seen an upward estimate revision for 2026 earnings to $2.63 per share from $2.59 over the past 60 days. This company’s earnings for 2026 are expected to grow 93.4% on 6.9% higher revenues. APEI’s earnings topped the Zacks Consensus Estimate in each of the last four quarters, with the average surprise being 150.9%. APEI’s three-to-five-year expected earnings per share growth rate is currently 15%. It also has a VGM Score of A.

Price and Consensus: APEI

Lincoln: This Parsippany, NJ-based provider of career-focused postsecondary education offers training programs to high school graduates and working adults across the United States. Lincoln is benefiting from growing demand for skilled workers across electrical, HVAC, welding, automotive and healthcare fields. Increasing interest in trade-focused careers among students, parents and employers supports enrollment opportunities. The company's expansion into underserved markets through new campuses and cost-efficient, focused-program facilities is expected to drive growth. Strengthening high school recruitment, expanding employer partnerships and rising demand for skilled labor in AI-driven data center construction and maintenance provide additional opportunities. Moreover, its Lincoln 10.0 hybrid learning platform, improved student retention, enhanced enrollment conversion initiatives and expansion of high-demand programs at existing campuses support operational efficiency and growth. 

LINC stock — currently carrying a Zacks Rank #3 — has gained 5.7% over the past year. This company’s earnings for 2027 are expected to grow 28.1% on 8.7% higher revenues. LINC’s earnings topped the Zacks Consensus Estimate in each of the last four quarters, with the average surprise being 111.9%. LINC’s three-to-five-year expected earnings per share growth rate is currently 15%. It also has a VGM Score of B.

Price and Consensus: LINC

McGraw Hill: Headquartered in Columbus, OH, McGraw Hill provides K-12, higher education and professional learning solutions in the United States and internationally. The company is benefiting from growing demand for digital learning solutions, higher education market-share gains, and increasing adoption of Inclusive Access and Evergreen content delivery models, which support customer retention and recurring revenues. In K-12, Science of Reading mandates, curriculum adoption cycles, new literacy programs and expanding dyslexia screening solutions offer growth opportunities. AI-powered adaptive learning tools, personalized assessments and agentic AI initiatives are strengthening product differentiation and monetization prospects. Expanding medical education offerings, AI-enabled clinical training solutions and international opportunities further support growth. Improved pricing, cross-selling, digital adoption and AI-driven operational efficiencies provide additional momentum.

MH stock — currently carrying a Zacks Rank #3 — has gained 5.2% over the past year. MH has seen an upward estimate revision for fiscal 2027 and 2028 earnings to $1.95 per share from $1.94 and $1.98 per share from 1.96 over the past 60 days. Although the company’s earnings for fiscal 2027 are expected to decline, the same for fiscal 2028 are expected to grow 1.6% on 4% higher revenues. MH’s earnings topped the Zacks Consensus Estimate in each of the last four quarters, with the average surprise being 224.1%. It also has a VGM Score of A.

Price and Consensus: MH