EADSY vs. HEI: Which Stock Should Value Investors Buy Now?

Investors interested in stocks from the Aerospace - Defense Equipment sector have probably already heard of Airbus SE - Unsponsored ADR (EADSY) and Heico Corporation (HEI). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 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.

Currently, Airbus SE - Unsponsored ADR has a Zacks Rank of #2 (Buy), while Heico Corporation 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 EADSY has an improving earnings outlook. But this is just one factor that value investors are interested in.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.

EADSY currently has a forward P/E ratio of 31.16, while HEI has a forward P/E of 67.29. We also note that EADSY has a PEG ratio of 1.36. 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. HEI currently has a PEG ratio of 3.73.

Another notable valuation metric for EADSY is its P/B ratio of 7.79. 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, HEI has a P/B of 10.5.

These are just a few of the metrics contributing to EADSY's Value grade of B and HEI's Value grade of F.

EADSY is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that EADSY is likely the superior value option right now.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research