Investors with an interest in Schools stocks have likely encountered both Career Education (CECO - Free Report) and Afya (AFYA - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Career Education is sporting a Zacks Rank of #1 (Strong Buy), while Afya has a Zacks Rank of #3 (Hold). This means that CECO'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 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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
CECO currently has a forward P/E ratio of 11.99, while AFYA has a forward P/E of 48.40. We also note that CECO has a PEG ratio of 0.80. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. AFYA currently has a PEG ratio of 1.03.
Another notable valuation metric for CECO is its P/B ratio of 2.84. 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 8.86.
Based on these metrics and many more, CECO holds a Value grade of B, while AFYA has a Value grade of D.
CECO 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 CECO is likely the superior value option right now.