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LDOS or LMT: Which Is the Better Value Stock Right Now?

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Investors looking for stocks in the Aerospace - Defense sector might want to consider either Leidos (LDOS - Free Report) or Lockheed Martin (LMT - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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.

Currently, Leidos has a Zacks Rank of #2 (Buy), while Lockheed Martin has a Zacks Rank of #4 (Sell). 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 also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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 16.26, while LMT has a forward P/E of 17.29. We also note that LDOS has a PEG ratio of 1.75. 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. LMT currently has a PEG ratio of 4.12.

Another notable valuation metric for LDOS is its P/B ratio of 4.08. 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, LMT has a P/B of 15.97.

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

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


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