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

Zacks Equity Research
·2 min read

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 is more attractive to value investors? We'll need to take a closer look to find out.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

DaVita HealthCare has a Zacks Rank of #2 (Buy), while Chemed has a Zacks Rank of #3 (Hold) right now. 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 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 12.75, while CHE has a forward P/E of 31.23. We also note that DVA has a PEG ratio of 1.34. 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 3.24.

Another notable valuation metric for DVA is its P/B ratio of 4.52. 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 10.84.

These metrics, and several others, help DVA earn a Value grade of A, while CHE has been given a Value grade of D.

DVA stands above CHE thanks to its solid earnings outlook, and based on these valuation figures, we also 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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Zacks Investment Research