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Stride, Inc. (LRN) - free report >>
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Stride, Inc. (LRN) - free report >>
Bright Horizons Family Solutions Inc. (BFAM) - free report >>
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LRN vs. BFAM: Which Stock Is the Better Value Option?
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 stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
K12 has a Zacks Rank of #2 (Buy), while Bright Horizons Family Solutions has a Zacks Rank of #3 (Hold) right now. 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 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 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 34.72, while BFAM has a forward P/E of 42.30. We also note that LRN has a PEG ratio of 2.31. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. BFAM currently has a PEG ratio of 3.99.
Another notable valuation metric for LRN is its P/B ratio of 1.99. 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, BFAM has a P/B of 10.62.
These metrics, and several others, help LRN earn a Value grade of B, while BFAM has been given a 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.