GD or GE: Which Is the Better Value Stock Right Now?
Investors looking for stocks in the Aerospace - Defense sector might want to consider either General Dynamics (GD) or GE Aerospace (GE). 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, both General Dynamics and GE Aerospace are holding a Zacks Rank of #2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is only part of the picture for value investors.
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 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.
GD currently has a forward P/E ratio of 19.27, while GE has a forward P/E of 38.38. We also note that GD has a PEG ratio of 1.89. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. GE currently has a PEG ratio of 2.22.
Another notable valuation metric for GD is its P/B ratio of 3.29. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, GE has a P/B of 17.63.
These are just a few of the metrics contributing to GD's Value grade of B and GE's Value grade of D.
Both GD and GE are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that GD is the superior value option right now.
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This article originally published on Zacks Investment Research (zacks.com).
