Markets

GD or LMT: Which Is the Better Value Stock Right Now?

Investors interested in Aerospace - Defense stocks are likely familiar with General Dynamics (GD) and Lockheed Martin (LMT). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. 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 General Dynamics and Lockheed Martin are holding 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 only part of the picture 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 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.

GD currently has a forward P/E ratio of 14.72, while LMT has a forward P/E of 17.91. We also note that GD has a PEG ratio of 1.69. 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. LMT currently has a PEG ratio of 2.52.

Another notable valuation metric for GD is its P/B ratio of 3.92. 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, LMT has a P/B of 37.06.

These metrics, and several others, help GD earn a Value grade of B, while LMT has been given a Value grade of C.

Both GD and LMT are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that GD is the superior value option right now.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.