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TVTY vs. HQY: Which Stock Should Value Investors Buy Now?

Zacks Equity Research

Investors interested in stocks from the Medical Services sector have probably already heard of Tivity Health (TVTY) and HealthEquity (HQY). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Right now, Tivity Health is sporting a Zacks Rank of #2 (Buy), while HealthEquity 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 TVTY is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.

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 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.

TVTY currently has a forward P/E ratio of 7.88, while HQY has a forward P/E of 31.45. We also note that TVTY has a PEG ratio of 0.79. 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. HQY currently has a PEG ratio of 1.58.

Another notable valuation metric for TVTY is its P/B ratio of 2.08. 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, HQY has a P/B of 3.79.

These are just a few of the metrics contributing to TVTY's Value grade of B and HQY's Value grade of D.

TVTY sticks out from HQY in both our Zacks Rank and Style Scores models, so value investors will likely feel that TVTY is the better option right now.


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Healthways Inc (TVTY) : Free Stock Analysis Report
 
HealthEquity Inc (HQY) : Free Stock Analysis Report
 
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Zacks Investment Research