Pediatrix (MD) vs Aveanna Healthcare (AVAH) — Industry Showdown

There are plenty of ways to go about finding attractive stock picks. I’m going to share one I frequently turn to — it’s dead simple, and although it should be just one part of a wider market outlook, it’s still a great way to scout out opportunities and get acquainted with tickers you ought to be familiar with.

I promised simple as can be — so here goes. Pop over to WallStreetZen’s industry page, and find an A-rated industry.

When picking an industry, you should, of course, look at secular trends, market forecasts, and existing momentum — and I’m going to pick the Medical Care Facility industry. It currently ranks 20th overall, out of a total of 145 industries, and there’s a strong case to be made for favorable long-term conditions — healthcare is not discretionary spending, and with an aging population not just in the United States, but worldwide, demand is only set to skyrocket.

Next up, simply pull up the pages of the two highest-ranking stocks within the industry. In this case, those are Pediatrix Medical Group (NYSE: MD) and Aveanna Healthcare (NASDAQ: AVAH).

The two have similar market caps — MD’s clocks in at $1.84 billion, while AVAH’s stands at $1.75 billion. The former is a provider of specialized care for women, newborns, and children — the latter focuses on in-home care, with a particular specialization in senior care.

Of course, it’s where they differ that will ultimately decide whether we go for one or the other. So, let’s begin with an overview of their fundamentals. Both stocks have a Zen Rating of A — in simple terms, our proprietary quant rating system places them within at least the top 5% of the more than 4,600 stocks that it tracks.

So which one reigns supreme? 

Pediatrix Medical Group ranks in the top 1% — in fact, it’s the 15th highest rated stock on the whole. Aveanna Healthcare isn’t far behind — it also ranks in the top 1%, but is rated 23rd overall.

Why is this important? Well, stocks with a Zen Rating of A have provided an average annual return of 32.52% since the early 2000s. There are roughly 230 stocks with an A rating on any given day — and since our picks are relatively evenly matched, we’ll call this a tie.

To drill down into the specific advantages and disadvantages of either pick, we have to take a look at their Component Grade ratings. Each Zen Rating is a composite score derived from the 7 Component Grade ratings, each of which focuses on a different area.

First up — the valuation. MD is trading at a price-to-earnings (P/E) ratio of 11.08x. AVAH is trading at a P/E of 22.11x. The wider market average stands at 43.06x. Now, both are attractive valuations — but this one goes to Pediatrix — it has an A rating for Value, while Aveanna has a B rating. MD ranks in the 97th percentile for Value — that is, equal to or better than 97% of stocks, or, in other words, in the top 3%. AVAH, on the other hand, ranks in the 84th percentile.

What about the Growth Component Grade rating? Both stocks have a B here — but AVAH’s earnings are estimated to grow at a faster pace, so it ranks in the top 8%, whereas MD ranks in the top 15%.

I’m gonna level with you — both of these are great stocks. MD is better on Safety and Financials — AVAH has the edge when it comes to Sentiment and Momentum. Aveanna Healthcare also ranks higher in terms of our Artificial Intelligence Component Grade rating, which uses a neural network trained on more than two decades of market data to identify likely outperformers.

Here’s the thing — while I was interested in how the two stocks stack up against each other, I didn’t necessarily come here today to tell you which one to buy. Today was more about the journey, less the destination.

The truth is, the ratings were a framing device. Some of you might prefer AVAH’s superior Growth metrics. More conservative investors, on the other hand, might very well be drawn to MD’s superior Value rating, Safety metrics, and stronger balance sheet. I can’t account for all those differences — but what I can do is nudge you toward a system that I think is intuitive, workable, and which distills more than a hundred datapoints into actionable insights.

But — I’m not going to leave you without an answer — that’d be rude. For my money, I’d go with the lower-ranked of the two A-rated stocks. MD might rank higher on the whole, metrics-wise, but I believe that in the long run, AVAH’s core competency, senior care, stands to benefit more from demographic trends across the globe — and that’s something that doesn’t show up on the page ahead of time.

—> Click here to research Medical Care Facility stocks

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