Investors looking for stocks in the Schools sector might want to consider either Adtalem Global Education (ATGE) or Universal Technical Institute (UTI). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Adtalem Global Education and Universal Technical Institute are both sporting a Zacks Rank of #2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. 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.
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.
ATGE currently has a forward P/E ratio of 18.41, while UTI has a forward P/E of 31.22. We also note that ATGE has a PEG ratio of 1.23. 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. UTI currently has a PEG ratio of 2.08.
Another notable valuation metric for ATGE is its P/B ratio of 3.12. 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, UTI has a P/B of 6.11.
Based on these metrics and many more, ATGE holds a Value grade of B, while UTI has a Value grade of C.
Both ATGE and UTI are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ATGE is the superior value option right now.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
