Which stock offers the better value option?

Investors interested in school stocks are probably familiar with Afya (AFYA) and Bright Horizons Family Solutions (BFAM). But which of these two stocks is more attractive to value investors? To find out, we need to take a closer look at the two.

We have found that the best way to discover great value opportunities is to combine a strong Zacks Rank with an excellent grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores evaluate companies based on specific traits.

Currently, Afya has a Zacks Rank of #2 (Buy), while Bright Horizons Family Solutions has a Zacks Rank of #3 (Hold). This system places emphasis on companies that have seen positive earnings estimate revisions, so investors should feel confident that AFYA’s earnings outlook is likely to improve on a larger scale. However, this is only one factor of interest to value investors.

Value investors analyze a variety of traditional and proven metrics to find companies that they believe are undervalued at their current share price levels.

Our Value category evaluates stocks using a number of key metrics, including the tried-and-true P/E, P/S, earnings yield and cash flow per share, as well as a number of other fundamental metrics commonly used by value investors.

AFYA currently has a forward P/E ratio of 10.90, while BFAM has a forward P/E ratio of 37.69. We also note that AFYA has a PEG ratio of 0.46. This figure is similar to the commonly used P/E ratio, with the PEG ratio also taking into account a company’s expected earnings growth rate. BFAM currently has a PEG ratio of 3.90.

Another important valuation metric for AFYA is its P/B ratio of 2.13. 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. For comparison, BFAM has a P/B ratio of 5.60.

These and several other metrics help AFYA earn a score of A, while BFAM receives a score of D.

AFYA currently has an improving earnings outlook, which makes it stand out in our Zacks Rank Model. And based on the valuation metrics mentioned above, we believe AFYA is probably the better value option right now.

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Afya Limited (AFYA): Free Stock Analysis Report

Bright Horizons Family Solutions Inc. (BFAM): Free Stock Analysis Report

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