Investors interested in Aerospace - Defense stocks are likely familiar with Embraer (EMBJ) and RTX (RTX). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, both Embraer and RTX are holding a Zacks Rank of #2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have 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.
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.
EMBJ currently has a forward P/E ratio of 23.80, while RTX has a forward P/E of 30.48. We also note that EMBJ has a PEG ratio of 1.66. 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. RTX currently has a PEG ratio of 2.62.
Another notable valuation metric for EMBJ is its P/B ratio of 3.41. 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, RTX has a P/B of 4.32.
These are just a few of the metrics contributing to EMBJ's Value grade of B and RTX's Value grade of C.
Both EMBJ and RTX are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that EMBJ is the superior value option right now.
Zacks' Research Chief Names "Stock Most Likely to Double"
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.
Free: See Our Top Stock And 4 Runners UpEmbraer-Empresa Brasileira de Aeronautica (EMBJ) : Free Stock Analysis Report
RTX Corporation (RTX) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
