Investors interested in stocks from the Schools sector have probably already heard of Strategic Education (STRA) and American Public Education (APEI). 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.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, both Strategic Education and American Public Education are sporting a Zacks Rank of #1 (Strong Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings 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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
STRA currently has a forward P/E ratio of 11.72, while APEI has a forward P/E of 24.08. We also note that STRA has a PEG ratio of 0.78. 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. APEI currently has a PEG ratio of 1.61.
Another notable valuation metric for STRA is its P/B ratio of 1.13. 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, APEI has a P/B of 3.45.
Based on these metrics and many more, STRA holds a Value grade of B, while APEI has a Value grade of D.
Both STRA and APEI are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that STRA is the superior value option right now.
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Strategic Education Inc. (STRA): Free Stock Analysis Report
American Public Education, Inc. (APEI): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).