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

Investors looking for stocks in the Schools sector might want to consider either Perdoceo Education (PRDO) or 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.

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.

Perdoceo Education and Universal Technical Institute are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that PRDO's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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 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.

PRDO currently has a forward P/E ratio of 10.39, while UTI has a forward P/E of 48.29. We also note that PRDO has a PEG ratio of 0.69. 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. UTI currently has a PEG ratio of 3.22.

Another notable valuation metric for PRDO is its P/B ratio of 2.03. 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, UTI has a P/B of 5.94.

These are just a few of the metrics contributing to PRDO's Value grade of A and UTI's Value grade of D.

PRDO stands above UTI 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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This article originally published on Zacks Investment Research (zacks.com).

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