Investors interested in Medical - Outpatient and Home Healthcare stocks are likely familiar with Addus HomeCare (ADUS) and U.S. Physical Therapy (USPH). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Addus HomeCare is sporting a Zacks Rank of #2 (Buy), while U.S. Physical Therapy 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 ADUS 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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
ADUS currently has a forward P/E ratio of 18.60, while USPH has a forward P/E of 30.06. We also note that ADUS has a PEG ratio of 1.38. 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. USPH currently has a PEG ratio of 3.67.
Another notable valuation metric for ADUS is its P/B ratio of 2.03. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, USPH has a P/B of 2.39.
Based on these metrics and many more, ADUS holds a Value grade of B, while USPH has a Value grade of C.
ADUS is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that ADUS is likely the superior value option right now.
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Addus HomeCare Corporation (ADUS): Free Stock Analysis Report U.S. Physical Therapy, Inc. (USPH): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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