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 presents investors with the better value opportunity right now? 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, DaVita HealthCare is sporting a Zacks Rank of #1 (Strong Buy), while Chemed has a Zacks Rank of #2 (Buy). This means that DVA's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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 14.14, while CHE has a forward P/E of 31.69. We also note that DVA has a PEG ratio of 0.62. 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. CHE currently has a PEG ratio of 2.87.
Another notable valuation metric for DVA is its P/B ratio of 4.79. 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 10.46.
These metrics, and several others, help DVA earn a Value grade of A, while CHE has been given a Value grade of C.
DVA has seen stronger estimate revision activity and sports more attractive valuation metrics than CHE, so it seems like value investors will conclude that DVA is the superior 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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