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LDOS vs. HWM: Which Stock Is the Better Value Option?
Investors with an interest in Aerospace - Defense stocks have likely encountered both Leidos (LDOS - Free Report) and Howmet (HWM - Free Report) . 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.
Leidos has a Zacks Rank of #1 (Strong Buy), while Howmet has a Zacks Rank of #3 (Hold) right now. This means that LDOS's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
LDOS currently has a forward P/E ratio of 16.74, while HWM has a forward P/E of 44.63. We also note that LDOS has a PEG ratio of 1.13. 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. HWM currently has a PEG ratio of 1.60.
Another notable valuation metric for LDOS is its P/B ratio of 4.73. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, HWM has a P/B of 10.87.
These are just a few of the metrics contributing to LDOS's Value grade of B and HWM's Value grade of D.
LDOS stands above HWM thanks to its solid earnings outlook, and based on these valuation figures, we also feel that LDOS is the superior value option right now.