LHX or HWM: Which Is the Better Value Stock Right Now?

Investors looking for stocks in the Aerospace - Defense sector might want to consider either L3Harris (LHX) or 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.

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.

L3Harris has a Zacks Rank of #2 (Buy), while Howmet has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that LHX has an improving earnings outlook. But this is just one factor that value investors are interested in.

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.

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.

LHX currently has a forward P/E ratio of 27.02, while HWM has a forward P/E of 53.47. We also note that LHX has a PEG ratio of 2.07. 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. HWM currently has a PEG ratio of 2.48.

Another notable valuation metric for LHX is its P/B ratio of 2.76. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, HWM has a P/B of 15.49.

These metrics, and several others, help LHX earn a Value grade of B, while HWM has been given a Value grade of D.

LHX stands above HWM thanks to its solid earnings outlook, and based on these valuation figures, we also feel that LHX is the superior value option right now.

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

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