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

Zacks Equity Research
Amkor Technology (AMKR) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

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 offers value investors a better bang for their buck right now? We'll need to take a closer look.

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 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, Quest Diagnostics has a Zacks Rank of #2 (Buy), while Chemed has a Zacks Rank of #4 (Sell). This means that DGX'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 analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.

DGX currently has a forward P/E ratio of 14.98, while CHE has a forward P/E of 25.89. We also note that DGX has a PEG ratio of 2.24. 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. CHE currently has a PEG ratio of 2.93.

Another notable valuation metric for DGX is its P/B ratio of 2.44. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, CHE has a P/B of 8.96.

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

DGX has seen stronger estimate revision activity and sports more attractive valuation metrics than CHE, so it seems like value investors will conclude that DGX is the superior 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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