EMBJ or RTX: Which Is the Better Value Stock Right Now?

Investors with an interest in Aerospace - Defense stocks have likely encountered both Embraer (EMBJ) and RTX (RTX). 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 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.

Right now, both Embraer and RTX are sporting a Zacks Rank of #2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. 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.

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.

EMBJ currently has a forward P/E ratio of 23.62, while RTX has a forward P/E of 27.82. We also note that EMBJ has a PEG ratio of 1.59. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. RTX currently has a PEG ratio of 2.59.

Another notable valuation metric for EMBJ is its P/B ratio of 3.41. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, RTX has a P/B of 3.97.

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

Both EMBJ and RTX are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that EMBJ 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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