Investors interested in Aerospace - Defense Equipment stocks are likely familiar with Bae Systems PLC (BAESY) and Heico Corporation (HEI). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 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.
Bae Systems PLC and Heico Corporation are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that BAESY likely has seen a stronger improvement to its earnings outlook than HEI has recently. But this is just one factor that value investors are interested in.
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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
BAESY currently has a forward P/E ratio of 16.16, while HEI has a forward P/E of 53.33. We also note that BAESY has a PEG ratio of 1.23. 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. HEI currently has a PEG ratio of 4.23.
Another notable valuation metric for BAESY is its P/B ratio of 3.02. 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, HEI has a P/B of 8.74.
Based on these metrics and many more, BAESY holds a Value grade of B, while HEI has a Value grade of D.
BAESY stands above HEI thanks to its solid earnings outlook, and based on these valuation figures, we also feel that BAESY is the superior value option right now.
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