Investors interested in Medical - Outpatient and Home Healthcare stocks are likely familiar with DaVita HealthCare (DVA - Free Report) and Chemed (CHE - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? 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.
Both DaVita HealthCare and Chemed have a Zacks Rank of # 1 (Strong Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. 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.
DVA currently has a forward P/E ratio of 11.48, while CHE has a forward P/E of 30.82. We also note that DVA has a PEG ratio of 0.52. 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. CHE currently has a PEG ratio of 2.84.
Another notable valuation metric for DVA is its P/B ratio of 2.14. 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 10.92.
Based on these metrics and many more, DVA holds a Value grade of A, while CHE has a Value grade of D.
Both DVA and CHE are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that DVA is the superior value option right now.