Investors looking for stocks in the Aerospace - Defense Equipment sector might want to consider either Hexcel (HXL) or Aerojet Rocketdyne Holdings (AJRD). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Hexcel is sporting a Zacks Rank of #2 (Buy), while Aerojet Rocketdyne Holdings has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that HXL likely has seen a stronger improvement to its earnings outlook than AJRD has recently. 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 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.
HXL currently has a forward P/E ratio of 23.69, while AJRD has a forward P/E of 25.87. We also note that HXL has a PEG ratio of 2.30. 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 4.70.
Another notable valuation metric for HXL is its P/B ratio of 4.91. 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, AJRD has a P/B of 7.29.
Based on these metrics and many more, HXL holds a Value grade of B, while AJRD has a Value grade of F.
HXL has seen stronger estimate revision activity and sports more attractive valuation metrics than AJRD, so it seems like value investors will conclude that HXL is the superior option right now.
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Hexcel Corporation (HXL) : Free Stock Analysis Report
Aerojet Rocketdyne Holdings, Inc. (AJRD) : Free Stock Analysis Report
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