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PRDO vs. STRA: Which Stock Is the Better Value Option?

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Investors interested in stocks from the Schools sector have probably already heard of Perdoceo Education (PRDO - Free Report) and Strategic Education (STRA - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. 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, Perdoceo Education is sporting a Zacks Rank of #1 (Strong Buy), while Strategic Education has a Zacks Rank of #3 (Hold). This means that PRDO's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.

PRDO currently has a forward P/E ratio of 7.72, while STRA has a forward P/E of 29.89. We also note that PRDO has a PEG ratio of 0.51. 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. STRA currently has a PEG ratio of 1.99.

Another notable valuation metric for PRDO is its P/B ratio of 1.24. 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, STRA has a P/B of 1.34.

Based on these metrics and many more, PRDO holds a Value grade of A, while STRA has a Value grade of C.

PRDO has seen stronger estimate revision activity and sports more attractive valuation metrics than STRA, so it seems like value investors will conclude that PRDO is the superior option right now.


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