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Northrop Grumman Corporation (NOC) - free report >>
Embraer-Empresa Brasileira de Aeronautica (ERJ) - free report >>
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Northrop Grumman Corporation (NOC) - free report >>
Embraer-Empresa Brasileira de Aeronautica (ERJ) - free report >>
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ERJ vs. NOC: Which Stock Is the Better Value Option?
Investors interested in stocks from the Aerospace - Defense sector have probably already heard of Embraer (ERJ - Free Report) and Northrop Grumman (NOC - Free Report) . 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.
Embraer and Northrop Grumman are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. This means that ERJ's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst 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.
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.
ERJ currently has a forward P/E ratio of 17.83, while NOC has a forward P/E of 21.65. We also note that ERJ has a PEG ratio of 1.05. 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 9.89.
Another notable valuation metric for ERJ is its P/B ratio of 0.62. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, NOC has a P/B of 5.94.
These metrics, and several others, help ERJ earn a Value grade of A, while NOC has been given a Value grade of D.
ERJ sticks out from NOC in both our Zacks Rank and Style Scores models, so value investors will likely feel that ERJ is the better option right now.