Investors interested in stocks from the Aerospace - Defense Equipment sector have probably already heard of Curtiss-Wright (CW - Free Report) and Teledyne Technologies (TDY - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Both Curtiss-Wright and Teledyne Technologies have a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one factor that value investors are interested in.
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.
CW currently has a forward P/E ratio of 21.64, while TDY has a forward P/E of 28.31. We also note that CW has a PEG ratio of 1.70. 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. TDY currently has a PEG ratio of 3.77.
Another notable valuation metric for CW is its P/B ratio of 3.71. 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, TDY has a P/B of 3.81.
These are just a few of the metrics contributing to CW's Value grade of B and TDY's Value grade of F.
Both CW and TDY are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that CW is the superior value option right now.