DVA vs. CHE: Which Stock Is the Better Value Option?
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 companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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.
Currently, DaVita HealthCare has a Zacks Rank of #1 (Strong Buy), while Chemed has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that DVA likely has seen a stronger improvement to its earnings outlook than CHE has recently. 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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
DVA currently has a forward P/E ratio of 15.62, while CHE has a forward P/E of 26.33. We also note that DVA has a PEG ratio of 1.07. 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 9.31. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, CHE has a P/B of 9.33.
These are just a few of the metrics contributing to DVA's Value grade of A and CHE's Value grade of C.
DVA sticks out from CHE in both our Zacks Rank and Style Scores models, so value investors will likely feel that DVA is the better option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
DaVita Inc. (DVA) : Free Stock Analysis Report
Chemed Corporation (CHE) : Free Stock Analysis Report
