Investors with an interest in Aerospace - Defense stocks have likely encountered both Leidos (LDOS) and Harris (LHX). 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Leidos has a Zacks Rank of #2 (Buy), while Harris has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that LDOS is likely seeing its earnings outlook improve to a greater extent. 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.
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.
LDOS currently has a forward P/E ratio of 18.06, while LHX has a forward P/E of 22.11. We also note that LDOS has a PEG ratio of 2.41. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. LHX currently has a PEG ratio of 2.76.
Another notable valuation metric for LDOS 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, LHX has a P/B of 6.96.
These are just a few of the metrics contributing to LDOS's Value grade of B and LHX's Value grade of D.
LDOS 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 LDOS is likely the superior value option right now.
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Leidos Holdings, Inc. (LDOS) : Free Stock Analysis Report
L3Harris Technologies Inc (LHX) : Free Stock Analysis Report
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