Investors interested in stocks from the Business - Services sector have probably already heard of Bright Horizons Family Solutions (BFAM) and APi (APG). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Bright Horizons Family Solutions is sporting a Zacks Rank of #2 (Buy), while APi has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that BFAM likely has seen a stronger improvement to its earnings outlook than APG has recently. But this is just one factor that value investors are interested in.
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.
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.
BFAM currently has a forward P/E ratio of 16.51, while APG has a forward P/E of 27.12. We also note that BFAM has a PEG ratio of 1.30. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. APG currently has a PEG ratio of 2.71.
Another notable valuation metric for BFAM is its P/B ratio of 3.54. 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, APG has a P/B of 5.55.
These are just a few of the metrics contributing to BFAM's Value grade of B and APG's Value grade of C.
BFAM has seen stronger estimate revision activity and sports more attractive valuation metrics than APG, so it seems like value investors will conclude that BFAM is the superior option right now.
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Bright Horizons Family Solutions Inc. (BFAM): Free Stock Analysis Report
APi Group Corporation (APG): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).