Private corrections company GEO Group (NYSE: GEO) announced better-than-expected revenue in Q3 CY2025, with sales up 13.1% year on year to $682.3 million. On the other hand, next quarter’s revenue guidance of $663.5 million was less impressive, coming in 4.7% below analysts’ estimates. Its GAAP profit of $1.24 per share was 58.5% above analysts’ consensus estimates.

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George C. Zoley, Executive Chairman of GEO, said, “During the first three quarters of 2025, we believe we have made significant progress towards meeting our growth and strategic objectives. Since the beginning of the year, we have entered into new or expanded contracts that represent over $460 million in new incremental annualized revenues that are already under contract and are expected to normalize in 2026. This represents the largest amount of new business we have won in a single year in our Company’s history.

Company Overview

With a global footprint spanning three continents and approximately 81,000 beds across 100 facilities, GEO Group (NYSE: GEO) operates secure facilities, processing centers, and reentry services for government agencies in the United States, Australia, and South Africa.

Revenue Growth

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $2.53 billion in revenue over the past 12 months, GEO Group is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale.

As you can see below, GEO Group’s sales grew at a sluggish 1.1% compounded annual growth rate over the last five years. This shows it failed to generate demand in any major way and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. GEO Group’s annualized revenue growth of 2.1% over the last two years is above its five-year trend, but we were still disappointed by the results.

This quarter, GEO Group reported year-on-year revenue growth of 13.1%, and its $682.3 million of revenue exceeded Wall Street’s estimates by 2.5%. Company management is currently guiding for a 9.2% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 21.4% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and implies its newer products and services will fuel better top-line performance.

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Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

GEO Group has managed its cost base well over the last five years. It demonstrated solid profitability for a business services business, producing an average operating margin of 13.2%.

Looking at the trend in its profitability, GEO Group’s operating margin decreased by 2.9 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, GEO Group generated an operating margin profit margin of 6%, down 7.7 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

GEO Group’s EPS grew at a decent 7.7% compounded annual growth rate over the last five years, higher than its 1.1% annualized revenue growth. However, we take this with a grain of salt because its operating margin didn’t improve and it didn’t repurchase its shares, meaning the delta came from reduced interest expenses or taxes.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For GEO Group, its two-year annual EPS growth of 30.5% was higher than its five-year trend. This acceleration made it one of the faster-growing business services companies in recent history.

In Q3, GEO Group reported EPS of $1.24, up from $0.19 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects GEO Group’s full-year EPS of $1.70 to grow 2.4%.

Key Takeaways from GEO Group’s Q3 Results

It was good to see GEO Group beat analysts’ EPS expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. On the other hand, its revenue guidance for next quarter missed and its EPS guidance for next quarter fell short of Wall Street’s estimates. Overall, this was a mixed quarter. The stock traded up 2.3% to $17.21 immediately following the results.

Big picture, is GEO Group a buy here and now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.