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ACHC vs. THC: Which Stock Should Value Investors Buy Now?

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Investors with an interest in Medical - Hospital stocks have likely encountered both Acadia Healthcare (ACHC - Free Report) and Tenet Healthcare (THC - 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.

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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Acadia Healthcare and Tenet Healthcare are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that ACHC's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.

ACHC currently has a forward P/E ratio of 15.60, while THC has a forward P/E of 32.29. We also note that ACHC has a PEG ratio of 2.18. 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. THC currently has a PEG ratio of 14.74.

Another notable valuation metric for ACHC is its P/B ratio of 1.04. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, THC has a P/B of 5.19.

These are just a few of the metrics contributing to ACHC's Value grade of B and THC's Value grade of C.

ACHC is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that ACHC is likely the superior value option right now.


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