Investors looking for stocks in the Medical - Outpatient and Home Healthcare sector might want to consider either Quest Diagnostics (DGX) or The Pennant Group, Inc. (PNTG). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Quest Diagnostics has a Zacks Rank of #2 (Buy), while The Pennant Group, Inc. has a Zacks Rank of #4 (Sell) right now. This means that DGX'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 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.
DGX currently has a forward P/E ratio of 16.01, while PNTG has a forward P/E of 34.81. We also note that DGX has a PEG ratio of 2.59. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. PNTG currently has a PEG ratio of 2.68.
Another notable valuation metric for DGX is its P/B ratio of 2.38. 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, PNTG has a P/B of 5.64.
These are just a few of the metrics contributing to DGX's Value grade of A and PNTG's Value grade of C.
DGX has seen stronger estimate revision activity and sports more attractive valuation metrics than PNTG, so it seems like value investors will conclude that DGX is the superior option right now.
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