Investors with an interest in Aerospace - Defense stocks have likely encountered both Huntington Ingalls (HII) and RTX (RTX). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Huntington Ingalls and RTX are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. 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 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.
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.
HII currently has a forward P/E ratio of 15.61, while RTX has a forward P/E of 23.20. We also note that HII has a PEG ratio of 1.41. 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. RTX currently has a PEG ratio of 2.50.
Another notable valuation metric for HII is its P/B ratio of 1.84. 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, RTX has a P/B of 2.92.
These are just a few of the metrics contributing to HII's Value grade of B and RTX's Value grade of C.
HII sticks out from RTX in both our Zacks Rank and Style Scores models, so value investors will likely feel that HII is the better option right now.
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Huntington Ingalls Industries, Inc. (HII): Free Stock Analysis Report RTX Corporation (RTX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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