Investors with an interest in Medical - Outpatient and Home Healthcare stocks have likely encountered both Addus HomeCare (ADUS - Free Report) and U.S. Physical Therapy (USPH - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 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, Addus HomeCare is sporting a Zacks Rank of #2 (Buy), while U.S. Physical Therapy has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ADUS is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
ADUS currently has a forward P/E ratio of 28.90, while USPH has a forward P/E of 38.06. We also note that ADUS has a PEG ratio of 1.86. 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. USPH currently has a PEG ratio of 3.38.
Another notable valuation metric for ADUS is its P/B ratio of 3.09. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, USPH has a P/B of 6.29.
These are just a few of the metrics contributing to ADUS's Value grade of B and USPH's Value grade of D.
ADUS 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 ADUS is likely the superior value option right now.