Investors interested in Schools stocks are likely familiar with GP Strategies (GPX) and Strategic Education (STRA). But which of these two companies is the best option for those looking for undervalued stocks? 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
GP Strategies has a Zacks Rank of #1 (Strong Buy), while Strategic Education has a Zacks Rank of #3 (Hold) right now. This means that GPX's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.
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.
GPX currently has a forward P/E ratio of 12.11, while STRA has a forward P/E of 22.80. We also note that GPX has a PEG ratio of 0.81. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. STRA currently has a PEG ratio of 1.52.
Another notable valuation metric for GPX is its P/B ratio of 1.20. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, STRA has a P/B of 2.56.
These metrics, and several others, help GPX earn a Value grade of A, while STRA has been given a Value grade of D.
GPX has seen stronger estimate revision activity and sports more attractive valuation metrics than STRA, so it seems like value investors will conclude that GPX is the superior option right now.
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