Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?

One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Bridgepoint Education, Inc. stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:

PE Ratio

A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.

On this front, Bridgepoint Education has a trailing twelve months PE ratio of 16.4, as you can see in the chart below:



This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20. If we focus on the long-term PE trend, Bridgepoint Education’s current PE level puts it below its midpoint of 22.7 over the past five years. Moreover, the current level stands well below the highs for the stock, indicating that it could be a great entry point.



Further, the stock’s PE also compares favorably with the Zacks Consumer Discretionary sector’s trailing twelve months PE ratio, which stands at 23.6. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
 


We should also point out that Bridgepoint Education has a forward PE ratio (price relative to this year’s earnings) of just 13.3, so it is fair to say that a slightly more value-oriented path may be ahead for Bridgepoint Education stock in the near term too.

P/S Ratio

Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.

Right now, Bridgepoint Education has a P/S ratio of about 0.5. This is significantly lower than the S&P 500 average, which comes in at 3.1 right now. Also, as we can see in the chart below, this marks the lower range for this stock in particular over the past few years. This suggests some level of undervalued trading for BPI — at least compared to historical norms.



Broad Value Outlook

In aggregate, Bridgepoint Education currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Bridgepoint Education a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the PEG ratio for Bridgepoint Education is 1.3, a level that is slightly lower than the industry average of 1.5. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 10, which is better than the industry average of 10.6. Clearly, BPI is a solid choice on the value front from multiple angles.

What About the Stock Overall?

While Bridgepoint Education might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score of A and a Momentum Score of B. This gives BPI a Zacks VGM score — or its overarching fundamental grade — of A. (You can read more about the Zacks Style Scores here >>)

Meanwhile, the company’s recent earnings estimates have been somewhat disappointing. The current quarter and full year estimates have seen two and one downward revision respectively, in the past sixty days. On the other hand, there were no upward revisions in the same time frame.

This has had a mixed impact on the consensus estimate though, as the current quarter consensus estimate has tumbled 7.7% in the past two months, while the full year estimate has inched higher by 4.9%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.

Bottom Line

Bridgepoint Education is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Despite a Zacks Rank #3, the company has a solid Zacks Industry Rank (Top 41%), which hints at favorable broader factors. In fact, over the past two years, the industry has clearly outperformed the broader market, as you can see below:



So, value investors might want to wait for estimates to turn around in this name first, but once that happens, this stock could be a compelling pick.

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