Investors interested in Schools stocks are likely familiar with Perdoceo Education (PRDO) and Grand Canyon Education (LOPE). But which of these two companies is the best option for those looking for undervalued stocks? 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.
Right now, Perdoceo Education is sporting a Zacks Rank of #2 (Buy), while Grand Canyon Education has a Zacks Rank of #3 (Hold). This means that PRDO's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
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.
PRDO currently has a forward P/E ratio of 10.81, while LOPE has a forward P/E of 14.90. We also note that PRDO has a PEG ratio of 0.72. 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. LOPE currently has a PEG ratio of 0.99.
Another notable valuation metric for PRDO is its P/B ratio of 2.05. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, LOPE has a P/B of 5.94.
These are just a few of the metrics contributing to PRDO's Value grade of A and LOPE's Value grade of C.
PRDO stands above LOPE thanks to its solid earnings outlook, and based on these valuation figures, we also feel that PRDO is the superior value option right now.
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Perdoceo Education Corporation (PRDO): Free Stock Analysis Report
Grand Canyon Education, Inc. (LOPE): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).