Investors interested in Aerospace - Defense stocks are likely familiar with RTX (RTX) and Airbus Group (EADSY). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
RTX has a Zacks Rank of #2 (Buy), while Airbus Group has a Zacks Rank of #4 (Sell) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that RTX 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 try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
RTX currently has a forward P/E ratio of 21.70, while EADSY has a forward P/E of 25.82. We also note that RTX has a PEG ratio of 2.24. 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. EADSY currently has a PEG ratio of 3.41.
Another notable valuation metric for RTX is its P/B ratio of 2.86. 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, EADSY has a P/B of 6.52.
These metrics, and several others, help RTX earn a Value grade of B, while EADSY has been given a Value grade of D.
RTX has seen stronger estimate revision activity and sports more attractive valuation metrics than EADSY, so it seems like value investors will conclude that RTX is the superior option right now.
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RTX Corporation (RTX) : Free Stock Analysis Report
Airbus Group (EADSY) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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