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DGX vs. CHE: Which Stock Is the Better Value Option?

Zacks Equity Research
Umpqua (UMPQ) delivered earnings and revenue surprises of 30.77% and 15.98%, respectively, for the quarter ended June 2019. Do the numbers hold clues to what lies ahead for the stock?

Investors interested in stocks from the Medical - Outpatient and Home Healthcare sector have probably already heard of Quest Diagnostics (DGX) and Chemed (CHE). 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, Quest Diagnostics is sporting a Zacks Rank of #2 (Buy), while Chemed has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that DGX likely has seen a stronger improvement to its earnings outlook than CHE has recently. But this is just one factor that value investors are interested in.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.

DGX currently has a forward P/E ratio of 15.73, while CHE has a forward P/E of 27.05. We also note that DGX has a PEG ratio of 2.35. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. CHE currently has a PEG ratio of 3.06.

Another notable valuation metric for DGX is its P/B ratio of 2.56. 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, CHE has a P/B of 9.36.

These metrics, and several others, help DGX earn a Value grade of B, while CHE has been given a Value grade of C.

DGX 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 DGX is likely the superior value option right now.


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Quest Diagnostics Incorporated (DGX) : Free Stock Analysis Report
 
Chemed Corporation (CHE) : Free Stock Analysis Report
 
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