Investors with an interest in Aerospace - Defense stocks have likely encountered both Wesco Aircraft Holdings (WAIR - Free Report) and Northrop Grumman (NOC - 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Wesco Aircraft Holdings has a Zacks Rank of #2 (Buy), while Northrop Grumman 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 WAIR 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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
WAIR currently has a forward P/E ratio of 12.10, while NOC has a forward P/E of 18.88. We also note that WAIR has a PEG ratio of 1.01. 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. NOC currently has a PEG ratio of 1.68.
Another notable valuation metric for WAIR is its P/B ratio of 1.66. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, NOC has a P/B of 6.73.
Based on these metrics and many more, WAIR holds a Value grade of B, while NOC has a Value grade of C.
WAIR stands above NOC thanks to its solid earnings outlook, and based on these valuation figures, we also feel that WAIR is the superior value option right now.