APEI vs. BFAM: Assessing the Better Value Stock Option for Investors

Investors exploring the educational sector may already be familiar with American Public Education (APEI) and Bright Horizons Family Solutions (BFAM). The critical question for value investors is which stock represents a better buy based on undervaluation metrics?

Understanding Value Investing Strategies

To identify value stocks, it's common to combine a robust Zacks Rank with a high score in the Value category of the Style Scores system. The Zacks Rank focuses on companies with positive changes in earnings estimates, and the Style Scores evaluate firms using detailed traits.

At present, American Public Education holds a Zacks Rank of #2, indicating a 'Buy' recommendation, whereas Bright Horizons Family Solutions is at a Zacks Rank of #3, suggesting a 'Hold'. This means APEI is seen to have a more favorable earnings outlook.

Valuation Metrics to Consider

Traditional valuation metrics are crucial for value investors. These metrics include the P/E ratio, the P/S ratio, earnings yield, and cash flow per share, alongside other essential financial fundamentals.

The forward P/E ratio for APEI stands at 21.94, while BFAM's is higher at 34.40. Additionally, the PEG ratio, which combines the P/E ratio with expected earnings growth, is 1.46 for APEI and notably higher at 3.56 for BFAM.

Another important measure is the P/B ratio, which helps compare a company's market value to its book value. APEI's P/B ratio is 0.97, significantly lower than BFAM's P/B ratio of 5.07.

All these metrics contribute to APEI's Value grade of 'A', whereas BFAM scores a 'D' on the same scale.

Considering the more compelling valuation metrics and stronger earnings estimate revisions, it appears that APEI might be the better choice for value investors at the moment.

APEI, BFAM, Value