HII vs. RTX: Which Stock Is the Better Value Option?

Investors with an interest in Aerospace - Defense stocks have likely encountered both Huntington Ingalls (HII) and RTX (RTX). But which of these two stocks presents investors with the better value opportunity right now? Let's 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.

Right now, Huntington Ingalls is sporting a Zacks Rank of #2 (Buy), while RTX 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 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.

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 24.59, while RTX has a forward P/E of 29.69. We also note that HII has a PEG ratio of 1.71. 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. RTX currently has a PEG ratio of 2.90.

Another notable valuation metric for HII is its P/B ratio of 3.35. 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, RTX has a P/B of 3.99.

These are just a few of the metrics contributing to HII's Value grade of B and RTX's Value grade of D.

HII 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 HII 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