Investors interested in stocks from the Medical - Outpatient and Home Healthcare sector have probably already heard of Option Care (OPCH) 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.
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.
Right now, Option Care is sporting a Zacks Rank of #2 (Buy), while Chemed has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that OPCH likely has seen a stronger improvement to its earnings outlook than CHE has recently. 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 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 19.35, while CHE has a forward P/E of 22.80. We also note that OPCH has a PEG ratio of 1.77. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. CHE currently has a PEG ratio of 2.22.
Another notable valuation metric for OPCH is its P/B ratio of 3.90. 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 7.10.
Based on these metrics and many more, OPCH holds a Value grade of B, while CHE has a Value grade of D.
OPCH 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 OPCH is likely the superior value option right now.
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Option Care Health, Inc. (OPCH): Free Stock Analysis Report Chemed Corporation (CHE): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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