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BAESY vs. HEI: Which Stock Is the Better Value Option?
Investors interested in Aerospace - Defense Equipment stocks are likely familiar with Bae Systems PLC (BAESY - Free Report) and Heico Corporation (HEI - 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Bae Systems PLC is sporting a Zacks Rank of #1 (Strong Buy), while Heico Corporation has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that BAESY is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
BAESY currently has a forward P/E ratio of 14.59, while HEI has a forward P/E of 56.15. We also note that BAESY has a PEG ratio of 1.10. 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. HEI currently has a PEG ratio of 4.46.
Another notable valuation metric for BAESY is its P/B ratio of 3.21. 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 8.65.
These are just a few of the metrics contributing to BAESY's Value grade of B and HEI's Value grade of D.
BAESY is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that BAESY is likely the superior value option right now.