AFYA or UTI: Which Is the Better Value Stock Right Now?

Investors interested in Schools stocks are likely familiar with Afya (AFYA) and Universal Technical Institute (UTI). 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 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 Universal Technical Institute 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. But this is only part of the picture for value investors.

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 7.54, while UTI has a forward P/E of 26.85. We also note that AFYA has a PEG ratio of 1.57. 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. UTI currently has a PEG ratio of 1.79.

Another notable valuation metric for AFYA is its P/B ratio of 1.34. 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, UTI has a P/B of 3.15.

These metrics, and several others, help AFYA earn a Value grade of A, while UTI has been given a Value grade of C.

AFYA sticks out from UTI in both our Zacks Rank and Style Scores models, so value investors will likely feel that AFYA is the better option right now.

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

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