Investors with an interest in Schools stocks have likely encountered both Perdoceo Education (PRDO) and New Oriental Education (EDU). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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.
Perdoceo Education and New Oriental Education are sporting Zacks Ranks of #2 (Buy) and #5 (Strong Sell), respectively, right now. Investors should feel comfortable knowing that PRDO likely has seen a stronger improvement to its earnings outlook than EDU has recently. However, value investors will care about much more than just this.
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.
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.
PRDO currently has a forward P/E ratio of 11.92, while EDU has a forward P/E of 15.70. We also note that PRDO has a PEG ratio of 0.79. 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. EDU currently has a PEG ratio of 1.10.
Another notable valuation metric for PRDO is its P/B ratio of 1.96. 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, EDU has a P/B of 2.25.
These metrics, and several others, help PRDO earn a Value grade of A, while EDU has been given a Value grade of C.
PRDO 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 PRDO is likely the superior value option right now.
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New Oriental Education & Technology Group, Inc. (EDU) : Free Stock Analysis Report
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.
