LMT or HWM: Which Is the Better Value Stock Right Now?

Investors with an interest in Aerospace - Defense stocks have likely encountered both Lockheed Martin (LMT) and Howmet (HWM). 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.

Currently, both Lockheed Martin and Howmet are holding a Zacks Rank of #2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one piece of the puzzle 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.

LMT currently has a forward P/E ratio of 17.31, while HWM has a forward P/E of 54.99. We also note that LMT has a PEG ratio of 0.93. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. HWM currently has a PEG ratio of 2.18.

Another notable valuation metric for LMT is its P/B ratio of 15.96. 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 19.87.

These are just a few of the metrics contributing to LMT's Value grade of B and HWM's Value grade of D.

Both LMT and HWM are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that LMT is the superior value option right now.

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

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