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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.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Addus HomeCare and U.S. Physical Therapy are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. 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 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 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 15.24, while USPH has a forward P/E of 28.87. We also note that ADUS has a PEG ratio of 1.33. 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. USPH currently has a PEG ratio of 3.48.
Another notable valuation metric for ADUS is its P/B ratio of 1.70. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, USPH has a P/B of 2.35.
Based on these metrics and many more, ADUS holds a Value grade of B, while USPH has a Value grade of C.
ADUS stands above USPH thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ADUS is the superior value option right now.
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Addus HomeCare Corporation (ADUS) : Free Stock Analysis Report
U.S. Physical Therapy, Inc. (USPH) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).