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DVA vs. CHE: Which Stock Is the Better Value Option?

Zacks Equity Research
·2 min read

Investors looking for stocks in the Medical - Outpatient and Home Healthcare sector might want to consider either DaVita HealthCare (DVA) or Chemed (CHE). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.

Right now, DaVita HealthCare is sporting a Zacks Rank of #1 (Strong Buy), while Chemed has a Zacks Rank of #3 (Hold). 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 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.

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 12.21, while CHE has a forward P/E of 28.76. We also note that DVA has a PEG ratio of 1.02. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. CHE currently has a PEG ratio of 2.99.

Another notable valuation metric for DVA is its P/B ratio of 4.41. 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 9.98.

Based on these metrics and many more, DVA holds a Value grade of A, while CHE 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
 
Chemed Corporation (CHE) : Free Stock Analysis Report
 
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Zacks Investment Research