Investors with an interest in Medical - Outpatient and Home Healthcare stocks have likely encountered both Option Care (OPCH) and The Pennant Group, Inc. (PNTG). 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Option Care is sporting a Zacks Rank of #2 (Buy), while The Pennant Group, Inc. 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 OPCH is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
OPCH currently has a forward P/E ratio of 12.65, while PNTG has a forward P/E of 29.04. We also note that OPCH has a PEG ratio of 1.24. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. PNTG currently has a PEG ratio of 2.23.
Another notable valuation metric for OPCH is its P/B ratio of 2.81. 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, PNTG has a P/B of 3.36.
These are just a few of the metrics contributing to OPCH's Value grade of A and PNTG's Value grade of C.
OPCH sticks out from PNTG in both our Zacks Rank and Style Scores models, so value investors will likely feel that OPCH is the better option right now.
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