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

Zacks Equity Research
BancorpSouth (BXS) delivered earnings and revenue surprises of 0.00% and -3.66%, respectively, for the quarter ended June 2019. Do the numbers hold clues to what lies ahead for the stock?

Investors with an interest in Aerospace - Defense stocks have likely encountered both Textron (TXT) and Leidos (LDOS). But which of these two companies is the best option for those looking for undervalued stocks? 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Textron and Leidos are sporting Zacks Ranks of #2 (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 LDOS has recently. However, value investors will care about much more than just this.

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 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.

TXT currently has a forward P/E ratio of 13.61, while LDOS has a forward P/E of 13.89. We also note that TXT has a PEG ratio of 1.08. 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. LDOS currently has a PEG ratio of 1.46.

Another notable valuation metric for TXT is its P/B ratio of 2.34. 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, LDOS has a P/B of 2.85.

Based on these metrics and many more, TXT holds a Value grade of A, while LDOS has a Value grade of C.

TXT stands above LDOS 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
 
Leidos Holdings, Inc. (LDOS) : Free Stock Analysis Report
 
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