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LRN vs. UTI: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
·2 mins read

Investors looking for stocks in the Schools sector might want to consider either K12 (LRN) or Universal Technical Institute (UTI). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.

K12 and Universal Technical Institute are sporting Zacks Ranks of #1 (Strong Buy) and #4 (Sell), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that LRN has an improving earnings outlook. However, value investors will care about much more than just this.

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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

LRN currently has a forward P/E ratio of 28.55, while UTI has a forward P/E of 161.54. We also note that LRN has a PEG ratio of 1.43. 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. UTI currently has a PEG ratio of 10.77.

Another notable valuation metric for LRN is its P/B ratio of 1.85. 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, UTI has a P/B of 2.23.

These are just a few of the metrics contributing to LRN's Value grade of B and UTI's Value grade of D.

LRN 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 LRN is likely the superior value option right now.

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K12 Inc (LRN) : Free Stock Analysis Report
Universal Technical Institute Inc (UTI) : Free Stock Analysis Report
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Zacks Investment Research