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LDOS vs. NOC: Which Stock Is the Better Value Option?

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Investors interested in stocks from the Aerospace - Defense sector have probably already heard of Leidos (LDOS - 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.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Right now, Leidos is sporting a Zacks Rank of #2 (Buy), while Northrop Grumman has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that LDOS likely has seen a stronger improvement to its earnings outlook than NOC has recently. 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.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

LDOS currently has a forward P/E ratio of 14.69, while NOC has a forward P/E of 19.51. We also note that LDOS has a PEG ratio of 1.81. 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. NOC currently has a PEG ratio of 8.60.

Another notable valuation metric for LDOS is its P/B ratio of 3.59. 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, NOC has a P/B of 4.45.

These metrics, and several others, help LDOS earn a Value grade of A, while NOC has been given a Value grade of C.

LDOS 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 LDOS is likely the superior value option right now.


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