Investors with an interest in Schools stocks have likely encountered both K12 (LRN) and Grand Canyon Education (LOPE). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Currently, K12 has a Zacks Rank of #2 (Buy), while Grand Canyon Education has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that LRN is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
LRN currently has a forward P/E ratio of 8.58, while LOPE has a forward P/E of 17.87. We also note that LRN has a PEG ratio of 0.43. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. LOPE currently has a PEG ratio of 1.19.
Another notable valuation metric for LRN is its P/B ratio of 2.06. 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 6.69.
These metrics, and several others, help LRN earn a Value grade of B, while LOPE has been given a Value grade of D.
LRN sticks out from LOPE in both our Zacks Rank and Style Scores models, so value investors will likely feel that LRN is the better 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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