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 companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, both Perdoceo Education and Grand Canyon Education are sporting a Zacks Rank of #2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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 11.13, while LOPE has a forward P/E of 17.15. We also note that PRDO has a PEG ratio of 0.74. 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 1.14.
Another notable valuation metric for PRDO is its P/B ratio of 1.83. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, LOPE has a P/B of 5.77.
Based on these metrics and many more, PRDO holds a Value grade of A, while LOPE has 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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
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).
Zacks Investment Research
