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LRN or AFYA: 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 Afya (AFYA - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? 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 #1 (Strong Buy), while Afya has a Zacks Rank of #5 (Strong Sell) 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 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.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

LRN currently has a forward P/E ratio of 16.95, while AFYA has a forward P/E of 24.34. We also note that LRN has a PEG ratio of 0.85. 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. AFYA currently has a PEG ratio of 0.99.

Another notable valuation metric for LRN is its P/B ratio of 1.77. 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, AFYA has a P/B of 3.53.

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

LRN sticks out from AFYA 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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