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LRN vs. BFAM: Which Stock Should Value Investors Buy Now?

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Investors with an interest in Schools stocks have likely encountered both K12 (LRN - Free Report) and Bright Horizons Family Solutions (BFAM - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

K12 has a Zacks Rank of #1 (Strong Buy), while Bright Horizons Family Solutions has a Zacks Rank of #3 (Hold) right now. This means that LRN's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

LRN currently has a forward P/E ratio of 23.36, while BFAM has a forward P/E of 161.12. We also note that LRN has a PEG ratio of 1.17. 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. BFAM currently has a PEG ratio of 29.29.

Another notable valuation metric for LRN is its P/B ratio of 1.61. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, BFAM has a P/B of 7.28.

These are just a few of the metrics contributing to LRN's Value grade of B and BFAM's Value grade of D.

LRN 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 LRN is likely the superior value option right now.


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