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 is more attractive to value investors? We'll need to take a closer look to find out.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Both DaVita HealthCare and Chemed have a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. However, value investors will care about much more than just this.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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 13.57, while CHE has a forward P/E of 25.56. We also note that DVA has a PEG ratio of 1.58. 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 2.60.
Another notable valuation metric for DVA is its P/B ratio of 4.70. 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 9.75.
These metrics, and several others, help DVA earn a Value grade of A, while CHE has been given a Value grade of C.
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.