Investors interested in Aerospace - Defense stocks are likely familiar with Leidos (LDOS) and Howmet (HWM). But which of these two stocks presents investors with the better value opportunity right now? 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.
Currently, Leidos has a Zacks Rank of #2 (Buy), while Howmet has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that LDOS likely has seen a stronger improvement to its earnings outlook than HWM has recently. But this is just one factor that value investors are interested in.
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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
LDOS currently has a forward P/E ratio of 12.93, while HWM has a forward P/E of 40.64. We also note that LDOS has a PEG ratio of 1.75. 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. HWM currently has a PEG ratio of 2.38.
Another notable valuation metric for LDOS is its P/B ratio of 4.06. 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, HWM has a P/B of 11.96.
Based on these metrics and many more, LDOS holds a Value grade of A, while HWM has a Value grade of D.
LDOS has seen stronger estimate revision activity and sports more attractive valuation metrics than HWM, so it seems like value investors will conclude that LDOS is the superior option right now.
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Leidos Holdings, Inc. (LDOS): Free Stock Analysis Report Howmet Aerospace Inc. (HWM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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