Investors interested in stocks from the Medical - Outpatient and Home Healthcare sector have probably already heard of 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.
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.
DaVita HealthCare and Chemed are both sporting a Zacks Rank of # 1 (Strong Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. 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.
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 12.54, while CHE has a forward P/E of 26.52. We also note that DVA has a PEG ratio of 0.62. 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 2.30.
Another notable valuation metric for DVA is its P/B ratio of 4.20. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, CHE has a P/B of 9.54.
Based on these metrics and many more, DVA holds a Value grade of B, while CHE has a Value grade of F.
Both DVA and CHE are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that DVA is 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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