Investors interested in stocks from the Medical Services sector have probably already heard of AMN Healthcare Services (AMN) and Doximity (DOCS). But which of these two stocks presents investors with the better value opportunity right now? 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
AMN Healthcare Services has a Zacks Rank of #2 (Buy), while Doximity has a Zacks Rank of #4 (Sell) right now. This means that AMN's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture 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.
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.
AMN currently has a forward P/E ratio of 12.31, while DOCS has a forward P/E of 55.74. We also note that AMN has a PEG ratio of 3.70. 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. DOCS currently has a PEG ratio of 15.04.
Another notable valuation metric for AMN is its P/B ratio of 3.97. 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, DOCS has a P/B of 8.34.
These metrics, and several others, help AMN earn a Value grade of A, while DOCS has been given a Value grade of D.
AMN sticks out from DOCS in both our Zacks Rank and Style Scores models, so value investors will likely feel that AMN is the better option right now.
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