GD vs. GE: Which Stock Is the Better Value Option?
Investors with an interest in Aerospace - Defense stocks have likely encountered both General Dynamics (GD) and GE Aerospace (GE). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, General Dynamics is sporting a Zacks Rank of #2 (Buy), while GE Aerospace 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 GD 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.
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.
GD currently has a forward P/E ratio of 20.88, while GE has a forward P/E of 40.33. We also note that GD has a PEG ratio of 2.05. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. GE currently has a PEG ratio of 2.33.
Another notable valuation metric for GD is its P/B ratio of 3.57. 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, GE has a P/B of 18.52.
These metrics, and several others, help GD earn a Value grade of B, while GE has been given a Value grade of D.
GD sticks out from GE in both our Zacks Rank and Style Scores models, so value investors will likely feel that GD is the better option right now.
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This article originally published on Zacks Investment Research (zacks.com).
