Investors looking for stocks in the Medical - Outpatient and Home Healthcare sector might want to consider either DaVita HealthCare (DVA - Free Report) or Chemed (CHE - 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.
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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Currently, both DaVita HealthCare and Chemed are holding a Zacks Rank of # 1 (Strong Buy). 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 just one piece of the puzzle 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.
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.
DVA currently has a forward P/E ratio of 12.52, while CHE has a forward P/E of 25.76. We also note that DVA has a PEG ratio of 0.62. 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 2.24.
Another notable valuation metric for DVA is its P/B ratio of 4.20. 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 9.27.
Based on these metrics and many more, DVA holds a Value grade of B, while CHE has a Value grade of F.
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.