Investors interested in Schools stocks are likely familiar with Afya (AFYA) and American Public Education (APEI). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 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, Afya has a Zacks Rank of #2 (Buy), while American Public Education 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 AFYA is likely seeing its earnings outlook improve to a greater extent. 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.
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.
AFYA currently has a forward P/E ratio of 7.59, while APEI has a forward P/E of 20.81. We also note that AFYA has a PEG ratio of 0.85. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. APEI currently has a PEG ratio of 1.39.
Another notable valuation metric for AFYA is its P/B ratio of 1.51. 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, APEI has a P/B of 3.24.
Based on these metrics and many more, AFYA holds a Value grade of A, while APEI has a Value grade of C.
AFYA 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 AFYA is likely the superior value option right now.
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Afya Limited (AFYA): Free Stock Analysis Report
American Public Education, Inc. (APEI): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).