Investors interested in stocks from the Aerospace - Defense sector have probably already heard of Huntington Ingalls (HII) and Airbus Group (EADSY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Huntington Ingalls and Airbus Group are both sporting a Zacks Rank of #2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is only part of the picture for value investors.
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.
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.
HII currently has a forward P/E ratio of 17.93, while EADSY has a forward P/E of 29.43. We also note that HII has a PEG ratio of 1.59. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. EADSY currently has a PEG ratio of 7.30.
Another notable valuation metric for HII is its P/B ratio of 2.13. 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, EADSY has a P/B of 7.28.
Based on these metrics and many more, HII holds a Value grade of B, while EADSY has a Value grade of C.
Both HII and EADSY are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that HII is the superior value option right now.
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Huntington Ingalls Industries, Inc. (HII): Free Stock Analysis Report Airbus Group (EADSY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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