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LRN or BFAM: Which Is the Better Value Stock Right Now?

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Investors interested in stocks from the Schools sector have probably already heard of 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.

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 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, K12 is sporting a Zacks Rank of #1 (Strong Buy), while Bright Horizons Family Solutions has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that LRN likely has seen a stronger improvement to its earnings outlook than BFAM has recently. But this is only part of the picture for value investors.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.

LRN currently has a forward P/E ratio of 27.30, while BFAM has a forward P/E of 35.80. We also note that LRN has a PEG ratio of 1.82. 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. BFAM currently has a PEG ratio of 3.

Another notable valuation metric for LRN is its P/B ratio of 1.45. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, BFAM has a P/B of 8.75.

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

LRN sticks out from BFAM in both our Zacks Rank and Style Scores models, so value investors will likely feel that LRN is the better option right now.


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