Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
One company to watch right now is Stride (LRN). LRN is currently sporting a Zacks Rank #2 (Buy), as well as an A grade for Value.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a preferred metric because revenue can't really be manipulated, so sales are often a truer performance indicator. LRN has a P/S ratio of 1.18. This compares to its industry's average P/S of 1.51.
Finally, we should also recognize that LRN has a P/CF ratio of 17.45. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. LRN's P/CF compares to its industry's average P/CF of 39.89. Within the past 12 months, LRN's P/CF has been as high as 20.90 and as low as 7.96, with a median of 16.02.
Investors could also keep in mind Perdoceo Education (PRDO), another Schools stock with a Zacks Rank of #2 (Buy) and Value grade of A.
Shares of Perdoceo Education currently hold a Forward P/E ratio of 13.08, and its PEG ratio is 0.87. In comparison, its industry sports average P/E and PEG ratios of 13.06 and 0.45.
PRDO's Forward P/E has been as high as 13.31 and as low as 8.92, with a median of 11.42. During the same time period, its PEG ratio has been as high as 0.89, as low as 0.59, with a median of 0.76.
Perdoceo Education also has a P/B ratio of 2.30 compared to its industry's price-to-book ratio of 3.31. Over the past year, its P/B ratio has been as high as 2.35, as low as 1.45, with a median of 1.90.
These are only a few of the key metrics included in Stride and Perdoceo Education strong Value grade, but they help show that the stocks are likely undervalued right now. When factoring in the strength of its earnings outlook, LRN and PRDO look like an impressive value stock at the moment.
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Stride, Inc. (LRN): Free Stock Analysis Report Perdoceo Education Corporation (PRDO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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