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

Investors interested in stocks from the Aerospace - Defense sector have probably already heard of Huntington Ingalls (HII) and Howmet (HWM). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, Huntington Ingalls has a Zacks Rank of #2 (Buy), while Howmet has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that HII is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.

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.

HII currently has a forward P/E ratio of 23.17, while HWM has a forward P/E of 49.87. We also note that HII has a PEG ratio of 1.61. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. HWM currently has a PEG ratio of 2.09.

Another notable valuation metric for HII is its P/B ratio of 3.14. 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 17.4.

Based on these metrics and many more, HII holds a Value grade of B, while HWM has a Value grade of D.

HII has seen stronger estimate revision activity and sports more attractive valuation metrics than HWM, so it seems like value investors will conclude that HII is the superior option right now.

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

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