Investors with an interest in Schools stocks have likely encountered both K12 (LRN) and Grand Canyon Education (LOPE). But which of these two stocks presents investors with the better value opportunity right now? Let's 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.
K12 and Grand Canyon Education are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that LRN 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.
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.
LRN currently has a forward P/E ratio of 8.81, while LOPE has a forward P/E of 15.64. We also note that LRN has a PEG ratio of 0.44. 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. LOPE currently has a PEG ratio of 1.04.
Another notable valuation metric for LRN is its P/B ratio of 1.9. 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 6.22.
These metrics, and several others, help LRN earn a Value grade of A, while LOPE has been given a Value grade of D.
LRN has seen stronger estimate revision activity and sports more attractive valuation metrics than LOPE, so it seems like value investors will conclude that LRN is the superior option right now.
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Stride, Inc. (LRN): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).