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

Zacks Equity Research

Investors looking for stocks in the Aerospace - Defense Equipment sector might want to consider either CAE (CAE) or Teledyne Technologies (TDY). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

CAE and Teledyne Technologies are both sporting a Zacks Rank of # 2 (Buy) right now. 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. However, value investors will care about much more than just this.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.

CAE currently has a forward P/E ratio of 25.36, while TDY has a forward P/E of 33.33. We also note that CAE has a PEG ratio of 2.54. 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. TDY currently has a PEG ratio of 4.44.

Another notable valuation metric for CAE is its P/B ratio of 3.89. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, TDY has a P/B of 4.93.

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

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


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