Investors interested in stocks from the Aerospace – Defense sector have probably already heard of Leidos (LDOS) and Northrop Grumman (NOC). But which of these two stocks is more attractive to value investors? We’ll need to take a closer look to find out.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Leidos and Northrop Grumman are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. This means that LDOS’s earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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 15.73, while NOC has a forward P/E of 19.33. We also note that LDOS has a PEG ratio of 2.27. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company’s expected earnings growth rate. NOC currently has a PEG ratio of 3.17.
Another notable valuation metric for LDOS is its P/B ratio of 3.46. 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, NOC has a P/B of 5.61.
Based on these metrics and many more, LDOS holds a Value grade of B, while NOC has a Value grade of C.
LDOS stands above NOC thanks to its solid earnings outlook, and based on these valuation figures, we also feel that LDOS is the superior value option right now.
Just Released: Zacks Top 10 Stocks for 2022
In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2022?
From inception in 2012 through 2021, the
Zacks Top 10 Stocks
portfolios gained an impressive +1,001.2% versus the S&P 500’s +348.7%. Now our Director of Research has combed through 4,000 companies covered by the Zacks Rank and has handpicked the best 10 tickers to buy and hold. Don’t miss your chance to get in…because the sooner you do, the more upside you stand to grab.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
