Investors with an interest in Medical - Outpatient and Home Healthcare stocks have likely encountered both The Pennant Group, Inc. (PNTG) 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, The Pennant Group, Inc. is sporting a Zacks Rank of #2 (Buy), while Chemed has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that PNTG is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
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 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.
PNTG currently has a forward P/E ratio of 17.61, while CHE has a forward P/E of 25.15. We also note that PNTG has a PEG ratio of 1.35. 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. CHE currently has a PEG ratio of 3.62.
Another notable valuation metric for PNTG is its P/B ratio of 3.06. 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 10.54.
These are just a few of the metrics contributing to PNTG's Value grade of B and CHE's Value grade of C.
PNTG has seen stronger estimate revision activity and sports more attractive valuation metrics than CHE, so it seems like value investors will conclude that PNTG is the superior option right now.
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