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.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, DaVita HealthCare is sporting a Zacks Rank of #1 (Strong Buy), while Chemed 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 DVA is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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.
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.
DVA currently has a forward P/E ratio of 13.70, while CHE has a forward P/E of 31.22. We also note that DVA has a PEG ratio of 0.60. 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 2.88.
Another notable valuation metric for DVA is its P/B ratio of 4.64. 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 10.30.
These metrics, and several others, help DVA earn a Value grade of A, while CHE has been given a Value grade of C.
DVA stands above CHE thanks to its solid earnings outlook, and based on these valuation figures, we also feel that DVA is the superior value option right now.