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BAESY vs. HEI: Which Stock Should Value Investors Buy Now?

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Investors looking for stocks in the Aerospace - Defense Equipment sector might want to consider either Bae Systems PLC (BAESY - Free Report) or Heico Corporation (HEI - Free Report) . 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, Bae Systems PLC has a Zacks Rank of #2 (Buy), while Heico Corporation has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that BAESY likely has seen a stronger improvement to its earnings outlook than HEI has recently. But this is only part of the picture for value investors.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.

BAESY currently has a forward P/E ratio of 19.18, while HEI has a forward P/E of 71.70. We also note that BAESY has a PEG ratio of 1.54. 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. HEI currently has a PEG ratio of 3.70.

Another notable valuation metric for BAESY is its P/B ratio of 3.78. 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, HEI has a P/B of 10.07.

These are just a few of the metrics contributing to BAESY's Value grade of B and HEI's Value grade of F.

BAESY 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 BAESY is likely the superior value option right now.


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