EDU or UTI: Which Is the Better Value Stock Right Now?

Investors interested in stocks from the Schools sector have probably already heard of New Oriental Education (EDU) and Universal Technical Institute (UTI). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. 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.

New Oriental Education has a Zacks Rank of #1 (Strong Buy), while Universal Technical Institute has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that EDU is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.

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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

EDU currently has a forward P/E ratio of 15.98, while UTI has a forward P/E of 40.52. We also note that EDU has a PEG ratio of 0.86. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. UTI currently has a PEG ratio of 2.70.

Another notable valuation metric for EDU is its P/B ratio of 2.24. 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, UTI has a P/B of 5.11.

These are just a few of the metrics contributing to EDU's Value grade of A and UTI's Value grade of C.

EDU stands above UTI thanks to its solid earnings outlook, and based on these valuation figures, we also feel that EDU is the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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