Investors with an interest in Medical - Outpatient and Home Healthcare stocks have likely encountered both DaVita HealthCare (DVA) and Chemed (CHE). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, DaVita HealthCare has a Zacks Rank of #1 (Strong Buy), while Chemed has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that DVA is likely seeing its earnings outlook improve to a greater extent. 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.
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.
DVA currently has a forward P/E ratio of 13.08, while CHE has a forward P/E of 29.28. We also note that DVA has a PEG ratio of 0.57. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. CHE currently has a PEG ratio of 2.70.
Another notable valuation metric for DVA is its P/B ratio of 4.43. 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 9.66.
These are just a few of the metrics contributing to DVA's Value grade of A and CHE's Value grade of C.
DVA has seen stronger estimate revision activity and sports more attractive valuation metrics than CHE, so it seems like value investors will conclude that DVA is the superior option right now.
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DaVita Inc. (DVA) : Free Stock Analysis Report
Chemed Corporation (CHE) : Free Stock Analysis Report
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