GEO Group has gotten torched over the last six months - since January 2025, its stock price has dropped 23% to $26.08 per share. This was partly driven by its softer quarterly results and might have investors contemplating their next move.
Is there a buying opportunity in GEO Group, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think GEO Group Will Underperform?
Despite the more favorable entry price, we're sitting this one out for now. Here are three reasons why we avoid GEO and a stock we'd rather own.
1. Long-Term Revenue Growth Flatter Than a Pancake
A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Unfortunately, GEO Group struggled to consistently increase demand as its $2.42 billion of sales for the trailing 12 months was close to its revenue five years ago. This was below our standards and signals it’s a low quality business. 
2. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for GEO Group, its EPS declined by 31.5% annually over the last five years while its revenue was flat. This tells us the company struggled because its fixed cost base made it difficult to adjust to choppy demand.
3. Free Cash Flow Margin Dropping
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, GEO Group’s margin dropped by 8.9 percentage points over the last five years. Continued declines could signal it is in the middle of an investment cycle. GEO Group’s free cash flow margin for the trailing 12 months was 5.5%.
Final Judgment
GEO Group falls short of our quality standards. Following the recent decline, the stock trades at 14.8× forward P/E (or $26.08 per share). At this valuation, there’s a lot of good news priced in - we think there are better stocks to buy right now. Let us point you toward one of our all-time favorite software stocks.
Stocks We Like More Than GEO Group
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