Investors with an interest in Aerospace - Defense stocks have likely encountered both Huntington Ingalls (HII - Free Report) and Northrop Grumman (NOC - 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Huntington Ingalls and Northrop Grumman are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that HII's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.
HII currently has a forward P/E ratio of 14.25, while NOC has a forward P/E of 17.84. We also note that HII has a PEG ratio of 0.95. 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. NOC currently has a PEG ratio of 1.59.
Another notable valuation metric for HII is its P/B ratio of 6.26. 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 6.36.
These are just a few of the metrics contributing to HII's Value grade of A and NOC's Value grade of C.
HII sticks out from NOC in both our Zacks Rank and Style Scores models, so value investors will likely feel that HII is the better option right now.