Investors interested in Medical - Outpatient and Home Healthcare stocks are likely familiar with Aveanna Healthcare (AVAH) and Chemed (CHE). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Aveanna Healthcare has a Zacks Rank of #2 (Buy), while Chemed has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that AVAH is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle 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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
AVAH currently has a forward P/E ratio of 12.82, while CHE has a forward P/E of 21.59. We also note that AVAH has a PEG ratio of 0.86. 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 1.90.
Another notable valuation metric for AVAH is its P/B ratio of 8.48. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, CHE has a P/B of 8.49.
These metrics, and several others, help AVAH earn a Value grade of A, while CHE has been given a Value grade of C.
AVAH has seen stronger estimate revision activity and sports more attractive valuation metrics than CHE, so it seems like value investors will conclude that AVAH is the superior option right now.
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