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UTI vs. BFAM: Which Stock Is the Better Value Option?

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Investors interested in stocks from the Schools sector have probably already heard of Universal Technical Institute (UTI - Free Report) and Bright Horizons Family Solutions (BFAM - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Universal Technical Institute and Bright Horizons Family Solutions are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. Investors should feel comfortable knowing that UTI likely has seen a stronger improvement to its earnings outlook than BFAM has recently. But this is only part of the picture for value investors.

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.

UTI currently has a forward P/E ratio of 20.69, while BFAM has a forward P/E of 200.91. We also note that UTI has a PEG ratio of 1.38. 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. BFAM currently has a PEG ratio of 40.26.

Another notable valuation metric for UTI is its P/B ratio of 2.03. 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, BFAM has a P/B of 7.16.

These metrics, and several others, help UTI earn a Value grade of A, while BFAM has been given a Value grade of F.

UTI stands above BFAM thanks to its solid earnings outlook, and based on these valuation figures, we also feel that UTI is the superior value option right now.


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