Investors looking for stocks in the Schools sector might want to consider either TAL Education (TAL) or Lincoln Educational Services Corporation (LINC). 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.
TAL Education has a Zacks Rank of #1 (Strong Buy), while Lincoln Educational Services Corporation has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that TAL is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
TAL currently has a forward P/E ratio of 10.72, while LINC has a forward P/E of 33.15. We also note that TAL has a PEG ratio of 0.79. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. LINC currently has a PEG ratio of 2.21.
Another notable valuation metric for TAL is its P/B ratio of 1.68. 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, LINC has a P/B of 4.02.
These metrics, and several others, help TAL earn a Value grade of B, while LINC has been given a Value grade of C.
TAL sticks out from LINC in both our Zacks Rank and Style Scores models, so value investors will likely feel that TAL is the better option right now.
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TAL Education Group (TAL): Free Stock Analysis Report
Lincoln Educational Services Corporation (LINC): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).