Is Scholastic (SCHL) Stock a Buy After Recent Volatility?

The education publishing sector has long been a barometer of broader economic and technological shifts, and 2025 has proven no exception. Scholastic Corporation (SCHL), a bellwether in children's publishing and educational content, has navigated a turbulent year marked by digital disruption, school budget constraints, and evolving consumer preferences. For value investors, the question remains: Is SCHL stock a compelling buy amid these headwinds? A closer look at its financials, balance sheet optimization, and strategic adaptability offers clarity.

Financial Performance: Mixed Signals Amid Sector Challenges

Scholastic's Q3 2025 results revealed a tale of two segments. While the Children's Book Publishing and Distribution division drove a 4% year-over-year revenue increase to $335.4 million, the Education Solutions segment contracted by 16% to $57.2 million, reflecting a slowdown in supplemental curriculum demand. This divergence underscores the company's exposure to macroeconomic pressures, particularly in the K-12 and higher education markets, where delayed federal grants and declining enrollment have created uncertainty.

Adjusted EBITDA, however, surged 183% to $6.0 million in Q3, a testament to aggressive cost-cutting measures. Overhead expenses fell by $9.4 million year-over-year, driven by reduced employee-related costs. Scholastic also returned $35 million to shareholders through share repurchases and dividends, signaling confidence in its liquidity position. With a current ratio of 1.16, the company appears to have sufficient flexibility to navigate near-term volatility while pursuing strategic initiatives.

Balance Sheet Optimization: Progress Amid High Debt

Scholastic's debt-to-equity ratio of 52.15% and total debt of $457.9 million remain elevated, but the company has taken steps to address leverage concerns. Share repurchase authorizations have been increased to $100 million, and management has emphasized "cost discipline" as a priority. These efforts align with a broader industry trend of publishers reevaluating capital structures in response to declining print sales and rising digital competition according to recent analysis.

The company's liquidity position is further bolstered by its ownership of real estate assets, which provide additional flexibility for refinancing or asset monetization according to Seeking Alpha. While the debt burden is non-trivial, Scholastic's ability to generate $140–150 million in adjusted EBITDA for fiscal 2025 as reported suggests a path to gradual deleveraging, assuming revenue growth meets expectations.

Valuation Metrics: A Puzzle of Contradictions

Scholastic's valuation metrics present a paradox for value investors. As of July 2025, the stock traded at a P/E ratio of 52.35 according to market data, a sharp increase from the 36.48 P/E recorded in February 2025 according to industry reports. This jump reflects a negative EPS of -$0.07 in May 2025 according to earnings analysis, which rendered the P/E ratio temporarily uncalculable. Meanwhile, the P/B ratio of 0.81–0.82 according to investment research implies the stock is trading at a discount to its book value, a classic value investing signal.

The P/FCF ratio, however, complicates this narrative. At 21.57–37.9 according to investment research, the metric suggests the market is paying a premium for Scholastic's cash flow generation, despite the company's recent earnings volatility. This discrepancy highlights the tension between asset-based and cash-flow-based valuation models-a key consideration for investors weighing long-term potential against short-term risks.

Sector Headwinds and Strategic Adaptability

The education publishing sector faces a perfect storm of challenges in 2025. Digital transformation is accelerating, with institutions prioritizing subscriptions, pay-per-chapter models, and AI-driven adaptive platforms according to market analysis. Scholastic's integration of 9 Story Media Group and its push into YouTube content nearly 10 million views in February 2025 position it to capitalize on these trends. However, the Education Solutions segment's struggles-exacerbated by delayed federal grants and declining school budgets-underscore the sector's fragility.

Management's response has been twofold: cost optimization and digital innovation. The company has initiated a strategic review of the Education Solutions division to "optimize it for long-term success," while also leveraging high-margin digital content and streaming initiatives. These moves align with broader industry shifts, though their success will depend on execution and market adoption.

Is SCHL a Buy? A Value Investor's Dilemma

For value investors, Scholastic presents a mixed bag. The P/B ratio and balance sheet optimization efforts suggest undervaluation and operational discipline, while the P/FCF ratio and sector headwinds highlight risks. The company's ability to grow adjusted EBITDA to $140–150 million in 2025 as reported and its strategic pivot toward digital-first content offer upside potential. However, the Education Solutions segment's underperformance and the sector's structural challenges-such as budget cuts and digital disruption-cannot be ignored.

A cautious case for SCHL as a buy emerges if investors are willing to bet on its digital transformation and cost-cutting measures. The stock's current valuation, particularly the P/B discount, may reflect pessimism about the sector rather than intrinsic weakness in the company. That said, the high P/FCF ratio and earnings volatility warrant a conservative approach.

Conclusion

Scholastic's journey in 2025 reflects the broader struggles and opportunities facing the education publishing sector. While its financials and balance sheet optimization efforts provide a foundation for resilience, the path to value creation remains contingent on navigating digital disruption and sector-specific headwinds. For value investors with a medium-term horizon and a tolerance for volatility, SCHL could offer compelling upside-if management executes its strategic vision effectively.