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TXT vs. EADSY: Which Stock Is the Better Value Option?

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Investors interested in Aerospace - Defense stocks are likely familiar with Textron (TXT - Free Report) and Airbus Group (EADSY - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. 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, Textron has a Zacks Rank of #1 (Strong Buy), while Airbus Group has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that TXT has an improving earnings outlook. But this is just one piece of the puzzle for value investors.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.

TXT currently has a forward P/E ratio of 15.02, while EADSY has a forward P/E of 25.32. We also note that TXT has a PEG ratio of 1.48. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. EADSY currently has a PEG ratio of 2.05.

Another notable valuation metric for TXT is its P/B ratio of 2.64. 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, EADSY has a P/B of 7.44.

These metrics, and several others, help TXT earn a Value grade of B, while EADSY has been given a Value grade of C.

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


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