Investors interested in stocks from the Aerospace - Defense sector have probably already heard of Wesco Aircraft Holdings (WAIR - Free Report) and General Dynamics (GD - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Wesco Aircraft Holdings and General Dynamics are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that WAIR's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
WAIR currently has a forward P/E ratio of 15.26, while GD has a forward P/E of 17.97. We also note that WAIR has a PEG ratio of 1.27. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. GD currently has a PEG ratio of 1.93.
Another notable valuation metric for WAIR is its P/B ratio of 1.73. 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, GD has a P/B of 5.04.
Based on these metrics and many more, WAIR holds a Value grade of B, while GD has a Value grade of C.
WAIR has seen stronger estimate revision activity and sports more attractive valuation metrics than GD, so it seems like value investors will conclude that WAIR is the superior option right now.