Investors looking for stocks in the Aerospace - Defense Equipment sector might want to consider either Bae Systems PLC (BAESY) or EHang Holdings Limited Unsponsored ADR (EH). 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, Bae Systems PLC is sporting a Zacks Rank of #2 (Buy), while EHang Holdings Limited Unsponsored ADR has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that BAESY has an improving earnings outlook. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
BAESY currently has a forward P/E ratio of 25.71, while EH has a forward P/E of 853.50. We also note that BAESY has a PEG ratio of 1.93. 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. EH currently has a PEG ratio of 18.70.
Another notable valuation metric for BAESY is its P/B ratio of 5.17. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, EH has a P/B of 9.65.
Based on these metrics and many more, BAESY holds a Value grade of B, while EH has a Value grade of F.
BAESY has seen stronger estimate revision activity and sports more attractive valuation metrics than EH, so it seems like value investors will conclude that BAESY is the superior option right now.
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Bae Systems PLC (BAESY): Free Stock Analysis Report EHang Holdings Limited Unsponsored ADR (EH): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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