Investors looking for stocks in the Aerospace - Defense sector might want to consider either General Dynamics (GD) or Lockheed Martin (LMT). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. 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.
Right now, both General Dynamics and Lockheed Martin are sporting a Zacks Rank of # 2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one factor that value investors are interested in.
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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
GD currently has a forward P/E ratio of 15.82, while LMT has a forward P/E of 18.20. We also note that GD has a PEG ratio of 1.81. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. LMT currently has a PEG ratio of 2.56.
Another notable valuation metric for GD is its P/B ratio of 4.21. 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, LMT has a P/B of 37.63.
These metrics, and several others, help GD earn a Value grade of B, while LMT has been given a Value grade of C.
Both GD and LMT are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that GD is the superior value option right now.
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General Dynamics Corporation (GD) : Free Stock Analysis Report
Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
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