Investors interested in Medical - Outpatient and Home Healthcare stocks are likely familiar with LHC Group (LHCG) and U.S. Physical Therapy (USPH). 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.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Both LHC Group and U.S. Physical Therapy have a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings 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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
LHCG currently has a forward P/E ratio of 22.93, while USPH has a forward P/E of 38.94. We also note that LHCG has a PEG ratio of 1.36. 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. USPH currently has a PEG ratio of 3.46.
Another notable valuation metric for LHCG is its P/B ratio of 2.15. 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, USPH has a P/B of 6.39.
Based on these metrics and many more, LHCG holds a Value grade of B, while USPH has a Value grade of C.
Both LHCG and USPH are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that LHCG is the superior value option right now.
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