STRA vs. LINC: Which Stock Is the Better Value Option?

Investors with an interest in Schools stocks have likely encountered both Strategic Education (STRA) and Lincoln Educational Services Corporation (LINC). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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.

Currently, Strategic Education has a Zacks Rank of #2 (Buy), while Lincoln Educational Services Corporation has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that STRA is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

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.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

STRA currently has a forward P/E ratio of 10.90, while LINC has a forward P/E of 68.31. We also note that STRA has a PEG ratio of 0.73. 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. LINC currently has a PEG ratio of 4.55.

Another notable valuation metric for STRA is its P/B ratio of 1.09. 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, LINC has a P/B of 8.

Based on these metrics and many more, STRA holds a Value grade of A, while LINC has a Value grade of D.

STRA 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 STRA is likely the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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