John Lansing

IPOs are Back! Hot Company, Hot Sector, Hot Chart

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If you've been following me here at OptionsZone, then you know that I'm amped about the phenomenal opportunities the IPO market has to offer right now. And today I'm going to bring you my next best-of-breed IPO recommendation: Grand Canyon Education Inc. (LOPE).

If you haven't already read The Right Way to Invest in IPOs, I suggest you take a look so you can become familiar with my methodology when it comes to investing in newly public companies.

LOPE: A Solid Stock in a Solid Sector

Grand Canyon Education, which offers online education programs, has rock-solid fundamentals, and falls in a sector that has performed very well during the past few years -- even in the midst of the greatest bear market we have seen since the Great Depression.

Online education is a sector with some very high-beta momentum stocks like Apollo Group (APOL), ITT Educational Services (ESI), Strayer Education (STRA), Career Education (CECO) and New Oriental Education & Technology Group (EDU). Many of these names were among the very few stocks hitting new all-time highs as the market crashed in 2008.

LOPE is scheduled to report third-quarter results after the market close Nov. 3. As one of the fastest growing companies in its sector, I think the company will handily beat earnings estimates.

An Undervalued Gem

Take a look at the table below.

A price/earnings to growth (PEG) ratio of less than 1 signals that a stock or sector may be undervalued, while a PEG ratio above 1 signals that a stock or sector may be overvalued.

With a five-year expected PEG ratio of less than 1 in an industry that is running slightly above 1, more institutional money will likely flock to LOPE than to other names in the sector because of the value and high growth potential.