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

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Investors looking for stocks in the Medical - Outpatient and Home Healthcare sector might want to consider either The Pennant Group, Inc. (PNTG - Free Report) or Chemed (CHE - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

The Pennant Group, Inc. has a Zacks Rank of #2 (Buy), while Chemed has a Zacks Rank of #3 (Hold) right now. 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 factor that value investors are interested in.

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 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 23.98, while CHE has a forward P/E of 24.17. We also note that PNTG has a PEG ratio of 1.84. 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 3.10.

Another notable valuation metric for PNTG is its P/B ratio of 3.74. 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 10.25.

Based on these metrics and many more, PNTG holds a Value grade of B, while CHE has a Value grade of C.

PNTG 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 PNTG is likely the superior value option right now.


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Chemed Corporation (CHE) - free report >>

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