Investors interested in Medical - Hospital stocks are likely familiar with Acadia Healthcare (ACHC) and Tenet Healthcare (THC). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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.
Currently, Acadia Healthcare has a Zacks Rank of #1 (Strong Buy), while Tenet Healthcare has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ACHC is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
ACHC currently has a forward P/E ratio of 14.14, while THC has a forward P/E of 20.08. We also note that ACHC has a PEG ratio of 1.98. 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. THC currently has a PEG ratio of 9.17.
Another notable valuation metric for ACHC is its P/B ratio of 0.94. 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, THC has a P/B of 3.87.
These metrics, and several others, help ACHC earn a Value grade of B, while THC has been given a Value grade of C.
ACHC 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 ACHC is likely the superior value option right now.
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Acadia Healthcare Company, Inc. (ACHC) : Free Stock Analysis Report
Tenet Healthcare Corporation (THC) : Free Stock Analysis Report
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