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DVA vs. CHE: Which Stock Is the Better Value Option?

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Investors with an interest in Medical - Outpatient and Home Healthcare stocks have likely encountered both DaVita HealthCare (DVA - Free Report) and Chemed (CHE - Free Report) . 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

DaVita HealthCare has a Zacks Rank of #2 (Buy), while Chemed has a Zacks Rank of #3 (Hold) right now. This means that DVA's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.

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 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.

DVA currently has a forward P/E ratio of 13.78, while CHE has a forward P/E of 26.58. We also note that DVA has a PEG ratio of 1.51. 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. CHE currently has a PEG ratio of 2.71.

Another notable valuation metric for DVA is its P/B ratio of 4.82. 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 10.14.

These metrics, and several others, help DVA earn a Value grade of B, while CHE has been given a Value grade of C.

DVA sticks out from CHE in both our Zacks Rank and Style Scores models, so value investors will likely feel that DVA is the better option right now.


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