Investors interested in Aerospace - Defense Equipment stocks are likely familiar with Spirit Aerosystems (SPR) and Aerojet Rocketdyne Holdings (AJRD). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Spirit Aerosystems and Aerojet Rocketdyne Holdings are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that SPR has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
SPR currently has a forward P/E ratio of 10.83, while AJRD has a forward P/E of 26.58. We also note that SPR has a PEG ratio of 1.40. 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. AJRD currently has a PEG ratio of 4.83.
Another notable valuation metric for SPR is its P/B ratio of 7.58. 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, AJRD has a P/B of 7.64.
Based on these metrics and many more, SPR holds a Value grade of A, while AJRD has a Value grade of D.
SPR is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that SPR is likely the superior value option right now.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.