LMT vs. HWM: Which Stock Is the Better Value Option?

Investors with an interest in Aerospace - Defense stocks have likely encountered both Lockheed Martin (LMT) and Howmet (HWM). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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.

Currently, both Lockheed Martin and Howmet are holding a Zacks Rank of #2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. 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.

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.

LMT currently has a forward P/E ratio of 17.67, while HWM has a forward P/E of 42.67. We also note that LMT has a PEG ratio of 1.17. 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 2.05.

Another notable valuation metric for LMT is its P/B ratio of 14.16. 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 15.76.

Based on these metrics and many more, LMT holds a Value grade of B, while HWM has a Value grade of F.

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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