Investors with an interest in Aerospace - Defense stocks have likely encountered both Huntington Ingalls (HII) and Howmet (HWM). 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.
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 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, both Huntington Ingalls and Howmet are holding a Zacks Rank of #2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
HII currently has a forward P/E ratio of 19.53, while HWM has a forward P/E of 54.92. We also note that HII has a PEG ratio of 1.65. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. HWM currently has a PEG ratio of 2.55.
Another notable valuation metric for HII is its P/B ratio of 2.31. 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, HWM has a P/B of 15.86.
These metrics, and several others, help HII earn a Value grade of A, while HWM has been given a Value grade of D.
Both HII and HWM 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 Howmet Aerospace Inc. (HWM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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