Investors looking for stocks in the Aerospace - Defense sector might want to consider either Wesco Aircraft Holdings (WAIR - Free Report) or 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.
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.
Right now, both Wesco Aircraft Holdings and General Dynamics are sporting a Zacks Rank of # 2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one factor that value investors are interested in.
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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
WAIR currently has a forward P/E ratio of 12.40, while GD has a forward P/E of 14.94. We also note that WAIR has a PEG ratio of 1.03. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. GD currently has a PEG ratio of 1.68.
Another notable valuation metric for WAIR is its P/B ratio of 1.48. 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, GD has a P/B of 4.14.
These are just a few of the metrics contributing to WAIR's Value grade of B and GD's Value grade of C.
Both WAIR and GD are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that WAIR is the superior value option right now.