Investors with an interest in Medical - Outpatient and Home Healthcare stocks have likely encountered both DaVita HealthCare (DVA) and Amedisys (AMED). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
DaVita HealthCare and Amedisys are sporting Zacks Ranks of #2 (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 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.
DVA currently has a forward P/E ratio of 13.62, while AMED has a forward P/E of 36.10. We also note that DVA has a PEG ratio of 0.95. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. AMED currently has a PEG ratio of 3.
Another notable valuation metric for DVA is its P/B ratio of 8.98. 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, AMED has a P/B of 10.27.
Based on these metrics and many more, DVA holds a Value grade of A, while AMED has a 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
Amedisys, Inc. (AMED) : Free Stock Analysis Report
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