3 aerospace and defense companies to explore as space race, geopolitical relations intensify

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Summary

  • Northrop Grumman, General Dynamics

    DG
    and Huntington Ingalls Industries are posting predictable earnings and revenue growth.
  • All three companies are also currently undervalued or measured at fair value.

As traditional airlines continue to recover from declining travel demand caused by the Covid-19 pandemic, space startups like Jeff Bezos’ Blue Origin, Elon Musk’s SpaceX, and Virgin Galactic Holdings Inc

SPCE
. (SPCE, Financial), which strive to move forward by bringing ordinary citizens to “the last frontier,” and growing geopolitical tensions between the United States and the Middle East, Asia and even France have increasingly shifted the attention of investors to the aerospace and defense sector.

While there are many startups in this industry vying for a piece of the market share pie, investors may be interested in finding opportunities among established companies that are undervalued and have a track record of predictable growth. profits and income.

Since September 23, the GuruFocus All-in-one sifter, a Premium feature, found that aerospace and defense companies that were significantly undervalued to fairly rated on the basis of GF value and had a predictability rank of at least two out of five stars were Northrop Grumman Corp.

CNO
. (CNO, Financial), General Dynamics Corp. (DG, Financial) and Huntington Ingalls Industries Inc

HII
. (HII, Financial).

Northrop Grumman

Northrop Grumman (CNO, Financial) has a market capitalization of $ 56.02 billion; its shares were trading around $ 349.88 on Thursday with a price-to-earnings ratio of 12.63, a price-to-book ratio of 5.03 and a price-to-sell ratio of 1.53.

The Falls Church, Virginia-based company is one of the world’s largest weapons manufacturers and suppliers of military technology. Its products range from airplanes, combat vehicles and spacecraft to cybersecurity systems and radars.

Trading with a GF value of $ 374.29 and a GF price to value ratio of 0.94, the stock appears to be currently valued at fair value based on historical ratios, past performance and future earnings projections.

The valuation ranking of 6 out of 10, however, leans more towards an undervaluation as the stock price and price-to-book ratio both approach their multi-year lows.

GuruFocus rated the financial strength of Northrup Grumman at 5 out of 10. Despite adequate interest coverage, the Altman Z-Score of 2.96 indicates that the company is under some pressure as assets accumulate at a faster rate. as incomes increase. Return on invested capital, however, overshadows the weighted average cost of capital, suggesting that value is created as the business grows.

The company’s profitability was rated 9 out of 10. Although the operating margin is declining, it is supported by strong returns on equity, assets and capital that outperform the majority of competitors. Northrup Grumman also has a moderate Piotroski F-Score of 6 out of 9, which means trading conditions are typical of a stable business. Steady profit and revenue growth contributed to a predictability rating of 4.5 stars. According to GuruFocus, companies with this rank are reporting an average of 10.6% per year over a 10-year period.

Among the gurus invested in Northrop Grumman, Jim simons (Trades, Wallet) ‘Renaissance Technologies holds the largest position with 0.31% of its shares outstanding. Other major shareholder gurus include Yacktman Asset Management (Trades, Walletfunds of), Joel greenblatt (Trades, Wallet), Pioneer Investments, Louis moore bacon (Trades, Wallet), Scott Black (Trades, Wallet), Lee ainslie (Trades, Wallet), Mario gabelli (Trades, Wallet) and Ken fisher (Trades, Wallet).

General dynamics

General dynamics (DG, Financial) has a market capitalization of $ 55.16 billion; its shares were trading around $ 197.29 on Thursday with a price-to-earnings ratio of 17.19, a price-to-pound ratio of 3.61 and a price-to-sell ratio of 1.47.

The company, headquartered in Reston, Va., Manufactures everything from business jets and Gulfstream combat vehicles to nuclear submarines and communications systems.

Based on the GF value of $ 188.25 and a GF price / value ratio of 1.05, the stock is currently valued at fair value.

The valuation ranks 6 out of 10 undervalued points, even though its stock price and price-to-sell ratio are close to multi-year highs.

General Dynamics’ financial strength has been rated 5 out of 10 by GuruFocus. In addition to sufficient interest coverage, the Altman Z-Score of 3.03 indicates that the company is in good standing despite the fact that its assets are accumulating faster than income increases. ROIC also slightly eclipses WACC, indicating that value creation is underway.

The company’s profitability fared better, scoring a 7 out of 10. Even though margins are declining, General Dynamics is supported by returns above the majority of its industry peers as well as a Piotroski Moderate F-Score of 5. Regardless of a slowdown in growth in earnings per share over the past 12 months, the company has a three-star predictability rating. GuruFocus claims that companies with this rank return an average of 8.2% per year.

With a 0.88% stake, Barrow, Hanley, Mewhinney & Strauss is the company’s largest shareholder guru. PRIMECAP management (Trades, Wallet), Bill Nygren (Trades, Wallet), Tom gayner (Trades, Wallet), Charles Brandès (Trades, Wallet), First Eagle investment (Trades, Wallet), Richard Snow (Trades, Wallet), Paul Tudor Jones (Trades, Wallet), Mark Hillman (Trades, Wallet), Bernard horn (Trades, Wallet), Greenblatt, Pioneer Investments, Chuck royce (Trades, Wallet) and Fisher also own the inventory.

Huntington Ingalls Industries

Huntington Ingalls Industries (HII, Financial) has a market capitalization of $ 7.78 billion; its shares were trading around $ 194.41 on Thursday with a price-to-earnings ratio of 10.49, a price-to-book ratio of 3.79 and a price-to-sell ratio of 0.81.

The Newport News, Virginia-based company is the largest military shipbuilder in the United States. It also provides professional services to government partners as well as to its industry.

Based on a GF value of $ 237.11 and a GF price to value ratio of 0.81, the stock currently appears to be slightly undervalued.

The valuation ranking of 8 out of 10, however, favors undervaluation.

GuruFocus has rated Huntington Ingalls’ financial strength at 5 out of 10. In addition to adequate interest coverage, the high Altman Z-Score of 3 suggests the company is in good standing. ROIC also exceeds WACC, indicating good value creation.

The company’s profitability was rated 7 out of 10. Even though the operating margin is declining, Huntington Ingalls is posting strong returns that outperform the majority of its competitors and a moderate Piotroski F-Score of 6. The Steady profit and revenue growth contributed to a two-star predictability ranking. GuruFocus data shows that companies with this rank have an average annual return of 6%.

Simons’ company is the company’s largest guru shareholder with 0.19% of its shares outstanding. Pioneer Investments, Greenblatt, Jones and Ray dalio (Trades, Wallet) also have positions in Huntington Ingalls.

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Disclosures

I / we have no positions in the mentioned stocks and I do not intend to initiate any positions within the next 72 hours.


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