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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
DaVita HealthCare and Chemed are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. This means that DVA's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
DVA currently has a forward P/E ratio of 13.37, while CHE has a forward P/E of 28.70. We also note that DVA has a PEG ratio of 1.47. 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 2.92.
Another notable valuation metric for DVA is its P/B ratio of 4.68. 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 10.95.
These are just a few of the metrics contributing to DVA's Value grade of B and CHE's Value grade of C.
DVA 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 DVA is likely the superior value 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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