CNC vs. HUM: Which Stock Should Value Investors Buy Now?
Investors with an interest in Medical - HMOs stocks have likely encountered both Centene (CNC) and Humana (HUM). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, both Centene and Humana are sporting a Zacks Rank of # 2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one factor that value investors are interested in.
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.
CNC currently has a forward P/E ratio of 14.31, while HUM has a forward P/E of 19.82. We also note that CNC has a PEG ratio of 0.98. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. HUM currently has a PEG ratio of 1.61.
Another notable valuation metric for CNC is its P/B ratio of 2.24. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, HUM has a P/B of 4.04.
Based on these metrics and many more, CNC holds a Value grade of B, while HUM has a Value grade of C.
Both CNC and HUM are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that CNC is the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Centene Corporation (CNC) : Free Stock Analysis Report
Humana Inc. (HUM) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
