Investors interested in stocks from the Medical - Outpatient and Home Healthcare sector have probably already heard of Envision Healthcare and Addus HomeCare (ADUS - Free Report) . 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.
Envision Healthcare and Addus HomeCare are sporting Zacks Ranks of #2 (Buy) and #5 (Strong Sell), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that EVHC is likely seeing its earnings outlook improve to a greater extent. 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.
EVHC currently has a forward P/E ratio of 13.10, while ADUS has a forward P/E of 30.25. We also note that EVHC has a PEG ratio of 1.10. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ADUS currently has a PEG ratio of 2.02.
Another notable valuation metric for EVHC is its P/B ratio of 0.76. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, ADUS has a P/B of 3.89.
These are just a few of the metrics contributing to EVHC's Value grade of B and ADUS's Value grade of C.
EVHC stands above ADUS thanks to its solid earnings outlook, and based on these valuation figures, we also feel that EVHC is the superior value option right now.