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

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Investors interested in stocks from the Medical - Outpatient and Home Healthcare sector have probably already heard of Addus HomeCare (ADUS - Free Report) and Chemed (CHE - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Addus HomeCare and Chemed are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. 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 factor that value investors are interested in.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.

ADUS currently has a forward P/E ratio of 19.03, while CHE has a forward P/E of 21.90. We also note that ADUS has a PEG ratio of 1.32. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. CHE currently has a PEG ratio of 1.99.

Another notable valuation metric for ADUS is its P/B ratio of 2.19. 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, CHE has a P/B of 6.69.

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