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EHC or CHE: Which Is the Better Value Stock Right Now?

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Investors interested in Medical - Outpatient and Home Healthcare stocks are likely familiar with Encompass Health (EHC) 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.

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.

Encompass Health and Chemed are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that EHC'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 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 grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

EHC currently has a forward P/E ratio of 21.31, while CHE has a forward P/E of 27.54. We also note that EHC has a PEG ratio of 1.23. 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 3.73.

Another notable valuation metric for EHC is its P/B ratio of 4.17. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, CHE has a P/B of 8.52.

These metrics, and several others, help EHC earn a Value grade of B, while CHE has been given a Value grade of C.

EHC 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 EHC is likely the superior value option right now.


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Encompass Health Corporation (EHC) : Free Stock Analysis Report
 
Chemed Corporation (CHE) : Free Stock Analysis Report
 
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Zacks Investment Research