EHC vs. AMED: Which Stock Should Value Investors Buy Now?
EHC vs. AMED: Which Stock Is the Better Value Option?
Investors with an interest in Medical - Outpatient and Home Healthcare stocks have likely encountered both Encompass Health (EHC) and Amedisys (AMED). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Encompass Health has a Zacks Rank of #1 (Strong Buy), while Amedisys has a Zacks Rank of #5 (Strong Sell) right now. 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 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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
EHC currently has a forward P/E ratio of 17.41, while AMED has a forward P/E of 28.29. We also note that EHC has a PEG ratio of 0.97. 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. AMED currently has a PEG ratio of 2.56.
Another notable valuation metric for EHC is its P/B ratio of 3.53. 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, AMED has a P/B of 6.54.
Based on these metrics and many more, EHC holds a Value grade of B, while AMED has a Value grade of C.
EHC 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 EHC is likely the superior value option right now.
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Encompass Health Corporation (EHC): Free Stock Analysis Report
Amedisys, Inc. (AMED): Free Stock Analysis Report
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