Investors interested in Aerospace - Defense stocks are likely familiar with Leidos (LDOS) and Lockheed Martin (LMT). 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.
Currently, both Leidos and Lockheed Martin are holding a Zacks Rank of # 2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. However, value investors will care about much more than just this.
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 16.18, while LMT has a forward P/E of 16.48. We also note that LDOS has a PEG ratio of 1.70. 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. LMT currently has a PEG ratio of 2.35.
Another notable valuation metric for LDOS is its P/B ratio of 3.24. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, LMT has a P/B of 37.44.
Based on these metrics and many more, LDOS holds a Value grade of B, while LMT has a Value grade of C.
Both LDOS and LMT are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that LDOS is the superior value option right now.
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Leidos Holdings, Inc. (LDOS) : Free Stock Analysis Report
Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
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