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Bright Horizons Family Solutions Inc. (BFAM) - free report >>
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Bright Horizons Family Solutions Inc. (BFAM) - free report >>
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AFYA vs. BFAM: Which Stock Is the Better Value Option?
Investors interested in stocks from the Schools sector have probably already heard of Afya (AFYA - Free Report) and Bright Horizons Family Solutions (BFAM - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Afya is sporting a Zacks Rank of #1 (Strong Buy), while Bright Horizons Family Solutions has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that AFYA likely has seen a stronger improvement to its earnings outlook than BFAM has recently. But this is only part of the picture for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
AFYA currently has a forward P/E ratio of 10.04, while BFAM has a forward P/E of 33.20. We also note that AFYA has a PEG ratio of 0.42. 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. BFAM currently has a PEG ratio of 3.44.
Another notable valuation metric for AFYA is its P/B ratio of 1.93. 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, BFAM has a P/B of 4.93.
These metrics, and several others, help AFYA earn a Value grade of B, while BFAM has been given a Value grade of D.
AFYA 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 AFYA is likely the superior value option right now.