Investors with an interest in Aerospace - Defense Equipment stocks have likely encountered both Bae Systems PLC (BAESY) and Heico Corporation (HEI). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Bae Systems PLC has a Zacks Rank of #2 (Buy), while Heico Corporation has a Zacks Rank of #4 (Sell). 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 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.
BAESY currently has a forward P/E ratio of 17.18, while HEI has a forward P/E of 56.10. We also note that BAESY has a PEG ratio of 1.25. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. HEI currently has a PEG ratio of 4.09.
Another notable valuation metric for BAESY is its P/B ratio of 2.72. 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 8.28.
Based on these metrics and many more, BAESY holds a Value grade of A, 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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