Investors with an interest in Aerospace - Defense stocks have likely encountered both Leidos (LDOS) and Howmet (HWM). 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, both Leidos 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. However, value investors will care about much more than just this.
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.
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.
LDOS currently has a forward P/E ratio of 14.64, while HWM has a forward P/E of 46.16. We also note that LDOS has a PEG ratio of 1.98. 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 2.43.
Another notable valuation metric for LDOS is its P/B ratio of 4.66. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, HWM has a P/B of 13.44.
Based on these metrics and many more, LDOS holds a Value grade of A, while HWM has a Value grade of D.
Both LDOS and HWM are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that LDOS is the superior value option right now.
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Leidos Holdings, Inc. (LDOS): 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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