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Investors with an interest in Aerospace - Defense stocks have likely encountered both Leidos (LDOS) and Airbus Group (EADSY). But which of these two companies is the best option for those looking for undervalued stocks? 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 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.
Leidos and Airbus Group are sporting Zacks Ranks of #2 (Buy) and #5 (Strong Sell), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that LDOS is likely seeing its earnings outlook improve to a greater extent. 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.
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.
LDOS currently has a forward P/E ratio of 13.75, while EADSY has a forward P/E of 25.05. We also note that LDOS has a PEG ratio of 0.93. 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. EADSY currently has a PEG ratio of 2.68.
Another notable valuation metric for LDOS is its P/B ratio of 4.05. 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, EADSY has a P/B of 6.55.
These are just a few of the metrics contributing to LDOS's Value grade of A and EADSY's Value grade of D.
LDOS has seen stronger estimate revision activity and sports more attractive valuation metrics than EADSY, so it seems like value investors will conclude that LDOS is the superior option right now.
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Leidos Holdings, Inc. (LDOS) : Free Stock Analysis Report
Airbus Group (EADSY) : Free Stock Analysis Report