Investors looking for stocks in the Aerospace – Defense sector might want to consider either Leidos (LDOS – Free Report) or Howmet (HWM – Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let’s take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Leidos is sporting a Zacks Rank of #1 (Strong Buy), while Howmet has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that LDOS has an improving earnings outlook. 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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
LDOS currently has a forward P/E ratio of 14.52, while HWM has a forward P/E of 42.25. We also note that LDOS has a PEG ratio of 0.98. 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. HWM currently has a PEG ratio of 1.51.
Another notable valuation metric for LDOS is its P/B ratio of 4.17. 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 10.33.
Based on these metrics and many more, LDOS holds a Value grade of B, while HWM has a Value grade of D.
LDOS sticks out from HWM in both our Zacks Rank and Style Scores models, so value investors will likely feel that LDOS is the better option right now.
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