DVA vs. CHE: Which Stock Should Value Investors Buy Now?
Investors interested in stocks from the Medical - Outpatient and Home Healthcare sector have probably already heard of DaVita HealthCare (DVA) and Chemed (CHE). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
DaVita HealthCare and Chemed are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that DVA's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
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 13.91, while CHE has a forward P/E of 30.47. We also note that DVA has a PEG ratio of 1.53. 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 3.10.
Another notable valuation metric for DVA is its P/B ratio of 4.99. 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 10.41.
These metrics, and several others, help DVA earn a Value grade of A, while CHE has been given a Value grade of C.
DVA stands above CHE thanks to its solid earnings outlook, and based on these valuation figures, we also feel that DVA is the superior value option right now.
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