Investors interested in stocks from the Medical - Outpatient and Home Healthcare sector have probably already heard of Quest Diagnostics (DGX - Free Report) and Addus HomeCare (ADUS - 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Quest Diagnostics and Addus HomeCare are both sporting a Zacks Rank of # 2 (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. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
DGX currently has a forward P/E ratio of 15.80, while ADUS has a forward P/E of 32.83. We also note that DGX has a PEG ratio of 2.09. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. ADUS currently has a PEG ratio of 2.12.
Another notable valuation metric for DGX is its P/B ratio of 2.54. 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, ADUS has a P/B of 3.30.
These are just a few of the metrics contributing to DGX's Value grade of B and ADUS's Value grade of C.
Both DGX and ADUS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that DGX is the superior value option right now.