Investors interested in stocks from the Aerospace - Defense sector have probably already heard of Northrop Grumman (NOC) and Lockheed Martin (LMT). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.
Northrop Grumman and Lockheed Martin are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that NOC has an improving earnings outlook. But this is only part of the picture for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
NOC currently has a forward P/E ratio of 17.32, while LMT has a forward P/E of 18.16. We also note that NOC has a PEG ratio of 1.32. 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 NOC is its P/B ratio of 6.11. 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 28.14.
Based on these metrics and many more, NOC holds a Value grade of B, while LMT has a Value grade of C.
NOC 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 NOC is likely the superior value option right now.
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Northrop Grumman Corporation (NOC) : Free Stock Analysis Report
Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
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