Investors interested in Medical - Outpatient and Home Healthcare stocks are likely familiar with DaVita HealthCare (DVA) and Chemed (CHE). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
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.
DaVita HealthCare and Chemed are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that DVA has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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 13.70, while CHE has a forward P/E of 31.75. We also note that DVA has a PEG ratio of 0.60. 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 2.93.
Another notable valuation metric for DVA is its P/B ratio of 4.64. 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 10.48.
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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