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TXT vs. EADSY: Which Stock Is the Better Value Option?

Investors interested in Aerospace - Defense stocks are likely familiar with Textron (TXT) and Airbus Group (EADSY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

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.

Textron and Airbus Group are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that TXT likely has seen a stronger improvement to its earnings outlook than EADSY has recently. But this is only part of the picture for value investors.

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.

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.

TXT currently has a forward P/E ratio of 14.23, while EADSY has a forward P/E of 22.12. We also note that TXT has a PEG ratio of 1.21. 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. EADSY currently has a PEG ratio of 1.79.

Another notable valuation metric for TXT is its P/B ratio of 2.42. 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, EADSY has a P/B of 7.67.

These metrics, and several others, help TXT earn a Value grade of B, while EADSY has been given a Value grade of C.

TXT stands above EADSY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that TXT is the superior value option right now.

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Textron Inc. (TXT) : Free Stock Analysis Report

Airbus Group (EADSY) : Free Stock Analysis Report

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