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BAESY vs. HEI: Which Stock Should Value Investors Buy Now?

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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 stocks presents investors with the better value opportunity right now? 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.

Currently, Bae Systems PLC has a Zacks Rank of #2 (Buy), while Heico Corporation has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that BAESY likely has seen a stronger improvement to its earnings outlook than HEI has recently. 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.

BAESY currently has a forward P/E ratio of 17.50, while HEI has a forward P/E of 50.62. We also note that BAESY has a PEG ratio of 1.23. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. HEI currently has a PEG ratio of 3.54.

Another notable valuation metric for BAESY is its P/B ratio of 3.47. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, HEI has a P/B of 7.48.

These metrics, and several others, help BAESY earn a Value grade of B, while HEI has been given a Value grade of D.

BAESY has seen stronger estimate revision activity and sports more attractive valuation metrics than HEI, so it seems like value investors will conclude that BAESY is the superior option right now.


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