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TAL vs. LINC: Which Stock Is the Better Value Option?

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Investors looking for stocks in the Schools sector might want to consider either TAL Education (TAL - Free Report) or Lincoln Educational Services Corporation (LINC - 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, TAL Education is sporting a Zacks Rank of #1 (Strong Buy), while Lincoln Educational Services Corporation has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that TAL is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

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.

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.

TAL currently has a forward P/E ratio of 9.21, while LINC has a forward P/E of 30.31. We also note that TAL has a PEG ratio of 0.68. 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. LINC currently has a PEG ratio of 2.02.

Another notable valuation metric for TAL is its P/B ratio of 1.7. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, LINC has a P/B of 3.64.

These metrics, and several others, help TAL earn a Value grade of B, while LINC has been given a Value grade of C.

TAL is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that TAL is likely the superior value option right now.

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