Investors with an interest in Schools stocks have likely encountered both Bridgepoint Education and Adtalem Global Education (ATGE - 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, Bridgepoint Education is sporting a Zacks Rank of #1 (Strong Buy), while Adtalem Global Education has a Zacks Rank of #2 (Buy). This means that BPI'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 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.
BPI currently has a forward P/E ratio of 12.54, while ATGE has a forward P/E of 20.53. We also note that BPI has a PEG ratio of 1.25. 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. ATGE currently has a PEG ratio of 1.55.
Another notable valuation metric for BPI is its P/B ratio of 1.48. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, ATGE has a P/B of 2.37.
Based on these metrics and many more, BPI holds a Value grade of B, while ATGE has a Value grade of C.
BPI sticks out from ATGE in both our Zacks Rank and Style Scores models, so value investors will likely feel that BPI is the better option right now.