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EHC vs. CHE: Which Stock Should Value Investors Buy Now?

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Investors with an interest in Medical - Outpatient and Home Healthcare stocks have likely encountered both Encompass Health (EHC - Free Report) and Chemed (CHE - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 both sporting 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. But this is only part of the picture for value investors.

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.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

EHC currently has a forward P/E ratio of 22.49, while CHE has a forward P/E of 28. We also note that EHC has a PEG ratio of 1.73. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. CHE currently has a PEG ratio of 2.80.

Another notable valuation metric for EHC is its P/B ratio of 5.24. 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 9.17.

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

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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