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EHC vs. CHE: Which Stock Should Value Investors Buy Now?
Investors interested in Medical - Outpatient and Home Healthcare stocks are likely familiar with Encompass Health (EHC - Free Report) and Chemed (CHE - Free Report) . 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.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. 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, Encompass Health is sporting a Zacks Rank of #2 (Buy), while Chemed has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that EHC 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 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.
EHC currently has a forward P/E ratio of 22, while CHE has a forward P/E of 22.63. We also note that EHC has a PEG ratio of 1.25. 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. CHE currently has a PEG ratio of 2.06.
Another notable valuation metric for EHC is its P/B ratio of 3.56. 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, CHE has a P/B of 6.36.
These metrics, and several others, help EHC earn a Value grade of A, while CHE has been given a Value grade of C.
EHC stands above CHE thanks to its solid earnings outlook, and based on these valuation figures, we also feel that EHC is the superior value option right now.