Investors looking for stocks in the Medical - Outpatient and Home Healthcare sector might want to consider either Quest Diagnostics (DGX - Free Report) or Addus HomeCare (ADUS - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Quest Diagnostics has a Zacks Rank of #2 (Buy), while Addus HomeCare has a Zacks Rank of #4 (Sell) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that DGX 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 try to analyze a wide range of traditional figures and metrics to help determine whether 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.
DGX currently has a forward P/E ratio of 16.25, while ADUS has a forward P/E of 33.45. We also note that DGX has a PEG ratio of 2.14. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ADUS currently has a PEG ratio of 2.16.
Another notable valuation metric for DGX is its P/B ratio of 2.58. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, ADUS has a P/B of 3.52.
These are just a few of the metrics contributing to DGX's Value grade of A and ADUS's Value grade of D.
DGX stands above ADUS thanks to its solid earnings outlook, and based on these valuation figures, we also feel that DGX is the superior value option right now.