Investors interested in Medical - Outpatient and Home Healthcare stocks are likely familiar with DaVita HealthCare (DVA) and Chemed (CHE). 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.
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 #2 (Buy). This means that DVA's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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 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 15.19, while CHE has a forward P/E of 31.27. We also note that DVA has a PEG ratio of 0.64. 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. CHE currently has a PEG ratio of 2.83.
Another notable valuation metric for DVA is its P/B ratio of 4.89. 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, CHE has a P/B of 11.67.
These metrics, and several others, help DVA earn a Value grade of A, while CHE has been given a Value grade of C.
DVA has seen stronger estimate revision activity and sports more attractive valuation metrics than CHE, so it seems like value investors will conclude that DVA is the superior option right now.