Investors with an interest in Schools stocks have likely encountered both K12 (LRN) and Grand Canyon Education (LOPE). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
K12 has a Zacks Rank of #2 (Buy), while Grand Canyon Education has a Zacks Rank of #3 (Hold) right now. This means that LRN's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
LRN currently has a forward P/E ratio of 16.61, while LOPE has a forward P/E of 23.51. We also note that LRN has a PEG ratio of 0.83. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. LOPE currently has a PEG ratio of 1.57.
Another notable valuation metric for LRN is its P/B ratio of 4.31. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, LOPE has a P/B of 7.78.
Based on these metrics and many more, LRN holds a Value grade of A, while LOPE has a Value grade of C.
LRN is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that LRN is likely the superior value option right now.
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Stride, Inc. (LRN): Free Stock Analysis Report Grand Canyon Education, Inc. (LOPE): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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