GD or NOC: Which Is the Better Value Stock Right Now?

Investors interested in stocks from the Aerospace - Defense sector have probably already heard of General Dynamics GD and Northrop Grumman NOC. But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Right now, General Dynamics is sporting a Zacks Rank of #2 (Buy), while Northrop Grumman has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that GD 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 analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.

GD currently has a forward P/E ratio of 20.70, while NOC has a forward P/E of 20.86. We also note that GD has a PEG ratio of 1.64. 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. NOC currently has a PEG ratio of 2.40.

Another notable valuation metric for GD is its P/B ratio of 3.75. 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, NOC has a P/B of 5.36.

These metrics, and several others, help GD earn a Value grade of B, while NOC has been given a Value grade of C.

GD 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 GD is likely the superior value option right now.

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