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Investors interested in stocks from the Schools sector have probably already heard of K12 (LRN) and Afya (AFYA). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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.
Right now, K12 is sporting a Zacks Rank of #2 (Buy), while Afya has a Zacks Rank of #5 (Strong Sell). This means that LRN'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 analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
LRN currently has a forward P/E ratio of 18.48, while AFYA has a forward P/E of 25.74. We also note that LRN has a PEG ratio of 0.92. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. AFYA currently has a PEG ratio of 1.04.
Another notable valuation metric for LRN is its P/B ratio of 1.59. 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, AFYA has a P/B of 4.36.
Based on these metrics and many more, LRN holds a Value grade of B, while AFYA has a Value grade of D.
LRN stands above AFYA thanks to its solid earnings outlook, and based on these valuation figures, we also feel that LRN is the superior value option right now.
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Stride, Inc. (LRN) : Free Stock Analysis Report
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