The GEO Group, Inc. (GEO): what the price requires
At today's price, The GEO Group, Inc. (GEO) is priced for +17.9% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-19 · Source: https://boothcheck.com/report/GEO
Headline
| Field | Value |
|---|---|
| Ticker | GEO |
| Company | The GEO Group, Inc. |
| Current price | $30.18/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 9.6% |
| Operating margin today | 10.0% |
| Margin compression implied | -0.4pp |
| Implied growth | 17.9% |
| Multiple paid | 22x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 9.1% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.2pp.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | +0.78σ |
| sustained it ~5 years at this level | 40% |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple and growth-DCF.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.36x | 5 | expensive |
| Earnings | 1.42x | 3 | expensive |
| Relative | 0.90x | 5 | justifies |
| Growth | 1.11x | 2 | expensive |
Families that justify the price: Relative, Growth
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.1%); the inversion above states its own rate.
Per-Model Detail (n=15)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $0.00 | — | no | FCF base $0.0B, growth 13% (input: historical growth), terminal g 4.0%, WACC 7.1%, 6yr projection |
| DCF Exit Multiple | Growth | $29.54 | 1.02x | yes | Exit EV/EBITDA: 11.4x / 13.4x / 15.4x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $33.59 | 0.90x | yes | P/E 18x (static sector reference · 2026-04), scenarios: 14.8x / 18.0x / 21.2x (bear / base = reference held flat / bull), EV/EBITDA 12x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $22.03 | 1.37x | yes | BV/sh $11.18, ROE (TTM) 18.2%, ke 9.3% |
| Two-Stage Excess Return | Asset | $30.53 | 0.99x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $25.09 | 1.20x | yes | Rev $2.7B, growth 13% (input: historical growth; tapered), Terminal P/S: 1.2x / 1.5x / 1.7x (bear / base = today's held flat / bull, cap 12x) |
| Peter Lynch Fair Value | Relative | $23.64 | 1.28x | yes | EPS $1.97, growth 2% (input: historical EPS growth), PEG=7.41 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $13.33 | 2.26x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.32B × (1−21%) / WACC 7.1% → EPV (no growth) |
| Residual Income | Asset | $30.26 | 1.00x | yes | BV $11.18 + 5yr PV of (ROE (TTM) 18.2% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $22.26 | 1.36x | yes | √(22.5 × EPS $1.97 × BVPS $11.18) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $25.78 | 1.17x | yes | EBITDA $0.42B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | — | — | no | — |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $63.57 | 0.47x | yes | EPS $1.97 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $3.61 | 8.36x | yes | BV $11.18 × (ROIC 2.3% / WACC 7.1%) |
| P/Sales Sector | Relative | $50.95 | 0.59x | yes | Revenue $2.73B × sector P/S 2.5x |
| PEG Fair Value | Relative | $73.88 | 0.41x | yes | EPS $1.97 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $21.30 | 1.42x | yes | EPS $1.97 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $1.6b |
| Net debt / NOPAT (after-tax) | 7.66x |
| Net debt / operating income (pre-tax) | 6.05x |
| Interest coverage | 1.6x |
| Share count CAGR (dilution) | 2.5% |
| Burning cash | no |
Bullet Takeaways
- GEO Group's earnings are inflecting on federal immigration policy: Q1 2026 revenue up 17% to $705.2 million, EPS more than doubling to $0.29, occupancy up to 89% from 85%, and ICE contracts now 51% of revenue.
- At $29 the price leans on the relative multiple alone (blended landing near $24, reverse-DCF base near $17), with an inversion-implied 17% operating-income growth that extrapolates the policy-driven surge.
- The central risk is concentration and reversibility: more than half of revenue depends on current immigration-enforcement policy and a few government customers, on net debt near 5x operating income, so the thesis is a policy bet as much as an operating one.
Bull Case
Look at where the $29.27 price sits against the valuation methods and the read is balanced rather than stretched. Several frames land near or above the price: the relative-valuation method near $34 on a sector-median 18x P/E, the two-stage excess-return model near $31, and the reverse-DCF high case near $26 to the upside, with the simple excess-return frame near $22 off an $11.18 book value and a healthy 18.2% trailing return on equity. The spread says the market is paying a fair-to-modest multiple on a business whose earnings are inflecting upward, not pricing a speculative bet.
The earnings inflection is dramatic and policy-driven. GEO Group owns and operates secure detention and processing facilities, and federal immigration policy has turned its idle and underused capacity into a growth engine. Q1 2026 revenue rose 17% to $705.2 million and EPS more than doubled to $0.29 from $0.14, beating estimates handily. ICE contracts now represent 51% of total revenue, and the secure-services segment occupancy climbed to 89% from 85% a year earlier with customer retention near 95%. The 10-K notes available bed capacity at facilities with existing contracts (FY2025 10-K, accession 0001193125-26-071747), the unused capacity that GEO is now filling at high incremental margins because the fixed cost of the facility is already in place.
The forward runway is the clearest part of the thesis. Management raised 2026 guidance to net income of $153 million to $166 million on revenue up to $3.1 billion, and pointed to the federal government's stated priority of expanding immigration-detention capacity toward roughly 100,000 beds or more while consolidating into fewer, larger facilities, exactly the kind of facility GEO owns. Filling existing beds and activating new ICE contracts (including the North Florida joint venture) drops a large share of revenue to the bottom line. A real-asset operator with idle capacity, a direct policy tailwind, and rising occupancy is a business where the operating leverage is just beginning to show, and the valuation methods bracket the price rather than scream expensive.
Bear Case
The uncomfortable truth a holder has to confront is qualitative before it is numerical: GEO Group's earnings surge rests almost entirely on a single, reversible source, federal immigration-detention policy. ICE contracts now make up 51% of revenue, which means more than half the business is a bet on the current administration's enforcement priorities continuing. Policy can change with an election, a court ruling, or a shift in appropriations, and the same political winds that drove occupancy from 85% to 89% can reverse just as fast. A business whose growth is this dependent on which way the federal government leans is not a stable compounder; it is a policy trade wearing the clothes of a real-asset operator, and the price embeds the optimistic policy path.
That concentration sits on top of two structural weaknesses. First, GEO depends on a handful of government customers, ICE, the US Marshals Service, and the Bureau of Prisons, plus state agencies, so the loss or non-renewal of even one large contract would swing results materially. The private-prison and detention industry also carries persistent reputational and regulatory risk: financing has tightened as some banks have stepped back from the sector, and policy or activist pressure can raise the cost of capital regardless of operating performance. Second, the company still carries net debt near $1.7 billion, roughly 5x trailing operating income, the legacy of its prior real-estate-investment-trust structure, which limits flexibility if the policy tailwind fades.
The numbers then frame the disconnect. At $29 the inversion implies roughly 17% operating-income growth against a current margin near 10.5%, a demanding extrapolation of the policy-driven surge. The reverse-DCF base case lands near $17, well below the price, and the engine's read is that only the relative multiple justifies the current level. In other words, strip out the assumption that immigration-detention demand keeps expanding at the recent pace and the conservative methods sit far lower. The bull case requires the policy environment to hold and capacity to keep filling; the bear case is that the price has already paid for a political cycle that, by its nature, does not last forever.
Valuation
Inverting the $29.27 price puts the embedded bet at roughly 17% operating-income growth against a current operating margin near 10.5%, with the price-implied margin near 8.9%. That is a demanding read for a business whose recent growth is policy-driven, and the engine characterizes the price as justified by the relative multiple alone.
The model X-ray clusters below to around the price. The relative-valuation method lands near $34 on a sector-median 18x P/E, the two-stage excess-return model near $31, the exit-multiple DCF near $22, the simple excess-return frame near $22 off an $11.18 book value with an 18.2% trailing ROE, and the discounted-future-market-cap method near $19. The blended landing across applicable methods is near $24, below the price. Only the relative multiple and the high-growth frames reach the current level, which is the signature of a price leaning on the recent earnings momentum continuing.
The characterization is clean: the price is justified by the relative multiple, while the asset-based and base-case growth frames land lower. GEO sits in the consumer-cyclical bucket in the model, but functionally it is a government-contract real-asset operator, so the right yardstick is occupancy, contract retention, and the policy backdrop rather than a typical cyclical multiple. The investable question is whether the 18% ROE and the policy-driven revenue surge represent a durable new run-rate or a cyclical high tied to one administration's enforcement agenda. If immigration-detention capacity keeps expanding toward the cited 100,000-bed target and occupancy holds near 89%, the relative frame is the right anchor; if policy reverses, the base-case methods near $17 to $24 mark where the value resets. Net debt near 5x operating income means the balance sheet amplifies both the upside operating leverage and the downside if the tailwind fades.
Catalysts
GEO Group reported Q1 2026 on May 6, with revenue up 17% to $705.2 million and EPS of $0.29 (more than double the year-ago $0.14 and well above the $0.19 estimate). ICE contracts reached 51% of revenue, secure-services occupancy rose to 89% from 85% a year earlier, and customer retention was near 95%. Operating expenses rose about 15% on the activation of new ICE facility contracts and higher occupancy, including the North Florida ICE detention joint venture. Management raised 2026 guidance to net income of $153 million to $166 million on revenue up to $3.1 billion.
The dominant catalyst, and the dominant risk, is federal immigration policy. The data points to watch are new ICE contract activations and bed-capacity expansion toward the cited target of roughly 100,000 detention beds or more, occupancy trends across owned and leased facilities, and contract renewals given the customer concentration. Debt reduction is a secondary lever, since the post-REIT balance sheet still carries leverage near 5x operating income, and any move on financing terms matters given the sector's tighter capital access. Election and appropriations developments are the macro variables that determine whether the policy tailwind that is driving the earnings surge persists.
Sources: GEO Group Q1 2026 results and call (Investing.com, Benzinga, Motley Fool transcript, Yahoo Finance, 2026); FY2025 10-K (accession 0001193125-26-071747).
Peer Cohorts (Per Segment, With Filing Citations)
Core business (reported)
- CXW (CORECIVIC, INC.)
- FY2025 10-K: …variable expenses per compensated man-day decreased as a result of a settlement of a legal matter at a facility in the Community segment recognized during the third quarter of 2024. The effect on operating margins of the increased average revenue per compensated man-day, the ERCs, and the decrease in variable…
- FY2025 10-K: …ongoing operations are organized into three principal business segments: • CoreCivic Safety segment, consisting of 44 correctional and detention facilities that are owned or controlled via a long-term lease and managed by CoreCivic, as well as those correctional and detention facilities owned by third parties but…
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.