Investors interested in Medical Services stocks are likely familiar with Elevance Health (ELV) and Apollo Medical Holdings, Inc. (AMEH). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Elevance Health has a Zacks Rank of #2 (Buy), while Apollo Medical Holdings, Inc. has a Zacks Rank of #4 (Sell) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ELV 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 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.
ELV currently has a forward P/E ratio of 14.32, while AMEH has a forward P/E of 31. We also note that ELV has a PEG ratio of 1.18. 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. AMEH currently has a PEG ratio of 1.91.
Another notable valuation metric for ELV is its P/B ratio of 2.97. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, AMEH has a P/B of 3.63.
These are just a few of the metrics contributing to ELV's Value grade of A and AMEH's Value grade of C.
ELV has seen stronger estimate revision activity and sports more attractive valuation metrics than AMEH, so it seems like value investors will conclude that ELV is the superior option right now.
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