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CW or CAE: Which Is the Better Value Stock Right Now?

Zacks

Investors interested in stocks from the Aerospace – Defense Equipment sector have probably already heard of Curtiss-Wright (CW) and CAE (CAE). But which of these two stocks presents investors with the better value opportunity right now? Let’s take a closer look.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.

Curtiss-Wright and CAE are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that CW’s earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture 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.

CW currently has a forward P/E ratio of 18.52, while CAE has a forward P/E of 24.55. We also note that CW has a PEG ratio of 2.24. 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. CAE currently has a PEG ratio of 2.73.

Another notable valuation metric for CW is its P/B ratio of 3.41. 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, CAE has a P/B of 3.77.

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

CW stands above CAE thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CW is the superior value option right now.


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Zacks Investment Research
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