Investors interested in Schools stocks are likely familiar with New Oriental Education (EDU) and Grand Canyon Education (LOPE). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
New Oriental Education and Grand Canyon Education are both sporting a Zacks Rank of #2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one factor that value investors are interested in.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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 14.36, while LOPE has a forward P/E of 16.25. We also note that EDU has a PEG ratio of 0.77. 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 1.08.
Another notable valuation metric for EDU is its P/B ratio of 1.92. 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, LOPE has a P/B of 6.33.
These metrics, and several others, help EDU earn a Value grade of B, while LOPE has been given a Value grade of C.
Both EDU and LOPE are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that EDU is the superior value option right now.
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New Oriental Education & Technology Group, Inc. (EDU): Free Stock Analysis Report
Grand Canyon Education, Inc. (LOPE): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).