Investors looking for stocks in the Schools sector might want to consider either Laureate Education (LAUR - Free Report) or 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Laureate Education and Strategic Education are both sporting a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one factor that value investors are interested in.
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.
LAUR currently has a forward P/E ratio of 7.99, while STRA has a forward P/E of 26.22. We also note that LAUR has a PEG ratio of 0.67. 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. STRA currently has a PEG ratio of 1.75.
Another notable valuation metric for LAUR is its P/B ratio of 1.54. 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, STRA has a P/B of 2.68.
These are just a few of the metrics contributing to LAUR's Value grade of B and STRA's Value grade of D.
Both LAUR and STRA are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that LAUR is the superior value option right now.