DGX vs. USPH: Which Stock Should Value Investors Buy Now?
Investors interested in Medical - Outpatient and Home Healthcare stocks are likely familiar with Quest Diagnostics (DGX) and U.S. Physical Therapy (USPH). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Quest Diagnostics has a Zacks Rank of #2 (Buy), while U.S. Physical Therapy has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that DGX likely has seen a stronger improvement to its earnings outlook than USPH has recently. 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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
DGX currently has a forward P/E ratio of 21.05, while USPH has a forward P/E of 108.08. We also note that DGX has a PEG ratio of 2.75. 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 9.01.
Another notable valuation metric for DGX is its P/B ratio of 2.79. 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 4.10.
Based on these metrics and many more, DGX holds a Value grade of B, while USPH has 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
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