McGraw Hill stock surges 19% after exceeding earnings expectations, reporting $1.40 per share profit for Q2 2026, and raising guidance for the year. Revenue fell 2.8% to $669.2 million, while GAAP profits declined 21% to $105.3 million.

Recurring revenue saw a 6.5% increase to $422.4 million, with high-margin digital revenue spiking 7.6%. Market share expanded, and gross profit margin grew 150 basis points to 79.2%. Despite declines in sales and profits, free cash flow dropped significantly, raising concerns.

McGraw Hill’s free cash flow plummeted, generating only $168.3 million in operating cash flow during H1, a 40% decrease from the previous year. Capital expenditures rose, resulting in a 68% decline to $119.2 million in H1 free cash flow. The enterprise value-to-free cash flow ratio is nearly 22x.

Despite potential attractiveness, with earnings and free cash flow decreasing, investment in McGraw Hill stock may not be advisable. The Motley Fool Stock Advisor’s 10 best stocks did not include McGraw Hill, suggesting other investment opportunities with potentially higher returns. Past recommendations like Netflix and Nvidia have yielded significant returns.

Read more at Yahoo Finance: Why Did McGraw Hill Stock Explode Higher Today?