Investors interested in stocks from the Schools sector have probably already heard of Perdoceo Education (PRDO) 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.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, both Perdoceo Education and Grand Canyon Education are holding a Zacks Rank of #2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. However, value investors will care about much more than just this.
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.
PRDO currently has a forward P/E ratio of 11.29, while LOPE has a forward P/E of 17.64. We also note that PRDO has a PEG ratio of 0.75. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. LOPE currently has a PEG ratio of 1.18.
Another notable valuation metric for PRDO is its P/B ratio of 1.86. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, LOPE has a P/B of 5.94.
These metrics, and several others, help PRDO earn a Value grade of A, while LOPE has been given a Value grade of C.
Both PRDO and LOPE are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PRDO is the superior value option right now.
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Perdoceo Education Corporation (PRDO): 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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