Investors looking for stocks in the Medical - Outpatient and Home Healthcare sector might want to consider either LHC Group (LHCG - 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.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.
Right now, LHC Group is sporting a Zacks Rank of #2 (Buy), while Chemed has a Zacks Rank of #3 (Hold). This means that LHCG's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle 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.
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.
LHCG currently has a forward P/E ratio of 24.44, while CHE has a forward P/E of 29.36. We also note that LHCG has a PEG ratio of 1.35. 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. CHE currently has a PEG ratio of 2.94.
Another notable valuation metric for LHCG is its P/B ratio of 3.04. 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, CHE has a P/B of 10.12.
These are just a few of the metrics contributing to LHCG's Value grade of A and CHE's Value grade of C.
LHCG sticks out from CHE in both our Zacks Rank and Style Scores models, so value investors will likely feel that LHCG is the better option right now.