HII or SAFRY: Which Is the Better Value Stock Right Now?

Investors interested in Aerospace - Defense stocks are likely familiar with Huntington Ingalls (HII) and Safran SA (SAFRY). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Huntington Ingalls and Safran SA are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that HII is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

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.

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.

HII currently has a forward P/E ratio of 14.06, while SAFRY has a forward P/E of 32.93. We also note that HII has a PEG ratio of 0.98. 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. SAFRY currently has a PEG ratio of 1.48.

Another notable valuation metric for HII is its P/B ratio of 1.93. 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, SAFRY has a P/B of 9.12.

These metrics, and several others, help HII earn a Value grade of B, while SAFRY has been given a Value grade of D.

HII 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 HII is likely the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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