Investors with an interest in Medical - Outpatient and Home Healthcare stocks have likely encountered both Addus HomeCare (ADUS) and U.S. Physical Therapy (USPH). 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 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 has a Zacks Rank of #2 (Buy), while U.S. Physical Therapy has a Zacks Rank of #3 (Hold) 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. However, value investors will care about much more than just this.
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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
ADUS currently has a forward P/E ratio of 22.81, while USPH has a forward P/E of 40.35. We also note that ADUS has a PEG ratio of 1.94. 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. USPH currently has a PEG ratio of 4.04.
Another notable valuation metric for ADUS is its P/B ratio of 2.33. 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 4.33.
Based on these metrics and many more, ADUS holds a Value grade of B, while USPH has a Value grade of C.
ADUS has seen stronger estimate revision activity and sports more attractive valuation metrics than USPH, so it seems like value investors will conclude that ADUS is the superior option right now.
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