Skillsoft Plummets 75% in a Year: Should You Hold or Fold the Stock?

Core Insights - Skillsoft Corp. (SKIL) shares have decreased by 75.2% over the past year, contrasting with a 4.4% growth in its industry and a 19.1% rise in the Zacks S&P 500 Composite [1] - The company has underperformed compared to peers such as Coherent Corp. (COHR), which saw a 161.5% increase, and Dave's (DAVE) 71.2% growth during the same period [1] Financial Performance - In the last six months, SKIL has lost 47.2%, while Coherent Corp and Dave experienced rallies of 95.9% and 0.4%, respectively [4] - For the third quarter of fiscal 2026, Skillsoft reported a 6% year-over-year decline in revenue, primarily due to a 16% drop in the Global Knowledge (GK) segment [5][6] - The GK segment's revenue decline was attributed to reduced demand for both physical and virtual instructor-led sessions, resulting in a non-cash goodwill impairment loss of $20.8 million and an adjusted net loss of $4.9 million [6] Strategic Initiatives - Skillsoft is conducting a strategic review of its GK segment with the potential for a sale, which could impact the balance sheet due to market reduction [5][6] - The Talent Development Solutions (TDS) segment experienced a 2% year-over-year dip, but management remains optimistic about the future growth potential driven by AI, particularly through the Percipio platform [7][9] Valuation Metrics - SKIL is trading at 1.6 times forward earnings, significantly lower than the industry average of 23.4 times, and has a trailing 12-month EV-to-EBITDA ratio of 2.5 compared to the industry average of 17.1 [10] - The company's return on equity (ROE) stands at 83.1%, well above the industry average of 15.6%, indicating effective utilization of shareholders' equity [12] - Return on invested capital is at 11.6%, surpassing the industry average of 7.7%, showcasing the company's efficiency in generating operating profits [14] Liquidity Concerns - Skillsoft's current ratio is 0.8, significantly below the industry average of 1.6, raising concerns about its liquidity sustainability [15] - The consensus estimate for revenues in the fourth quarter of fiscal 2026 is $130.2 million, reflecting a 2.7% decline year-over-year, while the EPS estimate is $1.27, indicating a 39.8% year-over-year decline [16] Future Outlook - For fiscal 2026, the revenue consensus estimate is $512.2 million, suggesting a 3.6% year-over-year dip, with EPS expected to fall by 3.7% to $4.17 [17] - The management's strategic review of the GK segment is seen as crucial for the company's future, with potential benefits for the TDS segment and the Percipio platform [18][19]