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 companies is the best option for those looking for undervalued stocks? 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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on 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). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ADUS has an improving earnings outlook. But this is only part of the picture for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
ADUS currently has a forward P/E ratio of 16.69, while USPH has a forward P/E of 26.78. We also note that ADUS has a PEG ratio of 1.45. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. USPH currently has a PEG ratio of 3.23.
Another notable valuation metric for ADUS is its P/B ratio of 1.88. 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, USPH has a P/B of 2.17.
These metrics, and several others, help ADUS earn a Value grade of B, while USPH has been given a Value grade of C.
ADUS has seen stronger estimate revision activity and sports more attractive valuation metrics than USPH, so it seems like value investors will conclude that ADUS is the superior option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
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).
Zacks Investment Research
