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

Zacks Equity Research
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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 companies is the best option for those looking for undervalued stocks? Let's take a closer look.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, both Encompass Health and Chemed are sporting a Zacks Rank of # 2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. However, value investors will care about much more than just this.

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 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 20.16, while CHE has a forward P/E of 26.95. We also note that EHC has a PEG ratio of 1.44. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. CHE currently has a PEG ratio of 3.06.

Another notable valuation metric for EHC is its P/B ratio of 3.38. 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 10.46.

These are just a few of the metrics contributing to EHC's Value grade of A and CHE's Value grade of C.

Both EHC and CHE are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that EHC is 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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