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

Investors interested in Schools stocks are likely familiar with Strategic Education (STRA) and Universal Technical Institute (UTI). But which of these two stocks presents investors with the better value opportunity right now? 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Strategic Education has a Zacks Rank of #1 (Strong Buy), while Universal Technical Institute has a Zacks Rank of #3 (Hold) right now. This means that STRA's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.

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.

STRA currently has a forward P/E ratio of 12.01, while UTI has a forward P/E of 45.44. We also note that STRA has a PEG ratio of 0.80. 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. UTI currently has a PEG ratio of 3.03.

Another notable valuation metric for STRA is its P/B ratio of 1.14. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, UTI has a P/B of 5.73.

Based on these metrics and many more, STRA holds a Value grade of B, while UTI has a Value grade of D.

STRA has seen stronger estimate revision activity and sports more attractive valuation metrics than UTI, so it seems like value investors will conclude that STRA is the superior option right now.

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

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