Investors interested in stocks from the Schools sector have probably already heard of Perdoceo Education (PRDO) and American Public Education (APEI). 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.
Currently, Perdoceo Education has a Zacks Rank of #2 (Buy), while American Public Education has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that PRDO has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
PRDO currently has a forward P/E ratio of 10.69, while APEI has a forward P/E of 21.57. We also note that PRDO has a PEG ratio of 0.71. 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. APEI currently has a PEG ratio of 1.44.
Another notable valuation metric for PRDO is its P/B ratio of 2.09. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, APEI has a P/B of 3.36.
These metrics, and several others, help PRDO earn a Value grade of A, while APEI has been given a Value grade of C.
PRDO is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that PRDO is likely the superior value option right now.
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Perdoceo Education Corporation (PRDO): Free Stock Analysis Report
American Public Education, Inc. (APEI): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).