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BAESY vs. HEI: Which Stock Is the Better Value Option?

Investors looking for stocks in the Aerospace - Defense Equipment sector might want to consider either Bae Systems PLC (BAESY) or Heico Corporation (HEI). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Right now, Bae Systems PLC is sporting a Zacks Rank of #2 (Buy), while Heico Corporation has a Zacks Rank of #3 (Hold). This means that BAESY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.

BAESY currently has a forward P/E ratio of 14.90, while HEI has a forward P/E of 59.92. We also note that BAESY has a PEG ratio of 1.61. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. HEI currently has a PEG ratio of 4.76.

Another notable valuation metric for BAESY is its P/B ratio of 2.86. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, HEI has a P/B of 8.76.

These metrics, and several others, help BAESY earn a Value grade of A, while HEI has been given a Value grade of D.

BAESY 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 BAESY is likely the superior value option right now.


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Heico Corporation (HEI) : Free Stock Analysis Report
 
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Zacks Investment Research