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UTI vs. STRA: Which Stock Should Value Investors Buy Now?

Zacks

Investors interested in Schools stocks are likely familiar with Universal Technical Institute (UTI) and Strategic Education (STRA). But which of these two stocks is more attractive to value investors? We’ll need to take a closer look to find out.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.

Universal Technical Institute has a Zacks Rank of #2 (Buy), while Strategic Education has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that UTI is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.

UTI currently has a forward P/E ratio of 19.77, while STRA has a forward P/E of 22.71. We also note that UTI has a PEG ratio of 1.32. 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. STRA currently has a PEG ratio of 1.51.

Another notable valuation metric for UTI is its P/B ratio of 1.94. Investors use the P/B ratio to look at a stock’s market value versus its book value, which is defined as total assets minus total liabilities. By comparison, STRA has a P/B of 2.58.

Based on these metrics and many more, UTI holds a Value grade of B, while STRA has a Value grade of C.

UTI 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 UTI is likely the superior value option right now.


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