BAESY vs. CAE: Which Stock Should Value Investors Buy Now?
Investors interested in stocks from the Aerospace - Defense Equipment sector have probably already heard of Bae Systems PLC (BAESY) and CAE (CAE). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Bae Systems PLC and CAE are both sporting a Zacks Rank of # 2 (Buy) right now. 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 just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
BAESY currently has a forward P/E ratio of 10.72, while CAE has a forward P/E of 78.14. We also note that BAESY has a PEG ratio of 2.61. 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. CAE currently has a PEG ratio of 9.77.
Another notable valuation metric for BAESY is its P/B ratio of 3.61. 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, CAE has a P/B of 3.66.
These metrics, and several others, help BAESY earn a Value grade of A, while CAE has been given a Value grade of D.
Both BAESY and CAE are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that BAESY is the superior value option right now.
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