ATGE or LOPE: Which Is the Better Value Stock Right Now?

Investors looking for stocks in the Schools sector might want to consider either Adtalem Global Education (ATGE) or Grand Canyon Education (LOPE). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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.

Adtalem Global Education and Grand Canyon Education are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ATGE has an improving earnings outlook. However, value investors will care about much more than just this.

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.

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.

ATGE currently has a forward P/E ratio of 13.04, while LOPE has a forward P/E of 16.65. We also note that ATGE has a PEG ratio of 0.87. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. LOPE currently has a PEG ratio of 1.11.

Another notable valuation metric for ATGE is its P/B ratio of 2.57. 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, LOPE has a P/B of 6.23.

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

ATGE stands above LOPE thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ATGE 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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