Investors with an interest in Medical - Outpatient and Home Healthcare stocks have likely encountered both American Renal Associates (ARA) and U.S. Physical Therapy (USPH). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Currently, American Renal Associates has a Zacks Rank of #2 (Buy), while U.S. Physical Therapy has a Zacks Rank of #3 (Hold). This means that ARA's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
ARA currently has a forward P/E ratio of 20.31, while USPH has a forward P/E of 38.69. We also note that ARA has a PEG ratio of 3.19. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. USPH currently has a PEG ratio of 3.44.
Another notable valuation metric for ARA is its P/B ratio of 4.14. 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, USPH has a P/B of 6.35.
Based on these metrics and many more, ARA holds a Value grade of A, while USPH has a Value grade of C.
ARA sticks out from USPH in both our Zacks Rank and Style Scores models, so value investors will likely feel that ARA is the better option right now.
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American Renal Associates Holdings, Inc (ARA) : Free Stock Analysis Report
U.S. Physical Therapy, Inc. (USPH) : Free Stock Analysis Report
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