Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 4 stocks made the list for top value stocks in the Aerospace & Defense industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued Aerospace & Defense Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

Click the button below to learn more about A+ Investor and subscribe today.

4 Undervalued Aerospace & Defense Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 4 undervalued stocks in the Aerospace & Defense industry for Tuesday, November 19, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Aerospace & Defense industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

Air Industries Group’s Value Grade

Value Grade:

Air Industries Group, together with its subsidiaries, engages in the design, manufacture, and sale of precision components and assemblies for defense and commercial aerospace industry in the United States. It offers actuators, arresting gears, aerostructures, aircraft structures, chaff pod assemblies, machining and milling solutions, cylinders, drag beams and braces, flight controls, flight safety critical components, integrated assemblies, landing gears, large diameter turn-mills, submarine valves, thrust struts, engine mounts, and turbine engine components and weldments for aircraft jet engines, ground turbines, and other complex machines. The company was founded in 1941 and is based in Bay Shore, New York.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Air Industries Group has a Value Score of 74, which is considered to be undervalued.

When you look at Air Industries Group’s price-to-sales ratio at 0.28 compared to the industry median at 1.91, this company has a lower price relative to revenue compared to its peers. This could make Air Industries Group’s stock more attractive for value investors.

Now, let’s assess Air Industries Group’s EV/EBITDA ratio, also known as enterprise multiple. At 11.7, when compared to the industry median of 14.1, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. Air Industries Group’s shareholder yield is lower than its industry median ratio of (1.20%). Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. Air Industries Group’s price-to-book ratio is lower than its industry median ratio of 3.68. This could make Air Industries Group more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Air Industries Group’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Air Industries Group’s price-to-free-cash-flow ratio is lower than its industry median ratio of 43.00. This could make Air Industries Group more attractive because the lower P/FCF ratio indicates that Air Industries Group is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

SIFCO Industries, Inc.’s Value Grade

Value Grade:

SIFCO Industries, Inc., together with its subsidiaries, produces and sells forgings and machined components primarily for the aerospace and energy markets in North America and Europe. The company’s processes and services include forging, heat-treating, chemical processing, and machining. It also offers original equipment manufacturer and aftermarket components for aircraft and industrial gas turbine engines; steam turbine blades; structural airframe components; aircraft landing gear components; aircraft wheels and brakes; rotating components for helicopters; and commercial/industrial products. In addition, the company provides heat-treatment, surface-treatment, non-destructive testing, and select machining and sub-assembly of forged components. SIFCO Industries, Inc. was founded in 1913 and is headquartered in Cleveland, Ohio.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

SIFCO Industries, Inc. has a Value Score of 84, which is considered to be undervalued.

SIFCO Industries, Inc.’s price-to-book ratio is higher than its peers. This could make SIFCO Industries, Inc. less attractive for value investors when compared to the industry median at 3.68.

You can read more about SIFCO Industries, Inc.’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Tel-Instrument Electronics Corp.’s Value Grade

Value Grade:

Tel-Instrument Electronics Corp. engages in designing, manufacturing, and sales of avionics test and measurement instruments for the commercial air transport, general aviation, and government/military aerospace and defense markets in the United States and internationally. It operates through two segments, Avionics Government and Avionics Commercial. The company provides instruments to test, measure, calibrate, and repair a range of airborne navigation and communication equipment. The company offers TS-4530A and T-4530i, an identification friend or foe test sets; T-47/M5, a dual crypto test set; TR-420, T-47NH, and T-47G, a multifunction ramp test set; TR-100AF taccan test test; AN/USM-708 and AN/USM-719 communications/navigation radio frequency avionics flight line testers; SDR/OMNI, an avionics test set; and lockheed martin MADL test set, a secure communications radio for the F-35. It serves customers directly or through distributors. The company was incorporated in 1947 and is headquartered in East Rutherford, New Jersey.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Tel-Instrument Electronics Corp. has a Value Score of 65, which is considered to be undervalued.

Tel-Instrument Electronics Corp.’s price-to-book ratio is higher than its peers. This could make Tel-Instrument Electronics Corp. less attractive for value investors when compared to the industry median at 3.68.

You can read more about Tel-Instrument Electronics Corp.’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Textron Inc.’s Value Grade

Value Grade:

Textron Inc. operates in the aircraft, defense, industrial, and finance businesses worldwide. It operates through six segments: Textron Aviation, Bell, Textron Systems, Industrial, Textron eAviation, and Finance. The Textron Aviation segment manufactures, sells, and services business jets, turboprop and piston engine aircraft, and military trainer and defense aircraft; and offers maintenance, inspection, and repair services, as well as sells commercial parts. The Bell segment supplies military and commercial helicopters, tiltrotor aircrafts, and related spare parts and services. The Textron Systems segment offers unmanned aircraft systems, electronic systems and solutions, advanced marine crafts, piston aircraft engines, live military air-to-air and air-to-ship training, weapons and related components, and armored and specialty vehicles. The Industrial segment offers blow-molded solutions, including conventional plastic fuel tanks and pressurized fuel tanks for hybrid vehicle applications, clear-vision systems, plastic tanks for catalytic reduction systems, and battery housing systems for use in electric vehicles primarily to automobile original equipment manufacturers (OEMs); and golf cars, off-road utility vehicles, powersports products, light transportation vehicles, aviation ground support equipment, professional turf-maintenance equipment, and turf-care vehicles to golf courses and resorts, government agencies and municipalities, consumers, outdoor enthusiasts, and commercial and industrial users. The Textron eAviation segment manufactures and sells light aircraft and gliders with electric and combustion engines; and provides other research and development initiatives related to sustainable aviation solutions. The Finance segment offers financing services to purchase new and pre-owned aviation aircraft and Bell helicopters. Textron Inc. was founded in 1923 and is headquartered in Providence, Rhode Island.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Textron Inc. has a Value Score of 61, which is considered to be undervalued.

Textron Inc.’s price-earnings ratio is 18.3 compared to the industry median at 36.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Textron Inc. more attractive for value investors.

Textron Inc.’s price-to-book ratio is higher than its peers. This could make Textron Inc. less attractive for value investors when compared to the industry median at 3.68.

You can read more about Textron Inc.’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Aerospace & Defense Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Aerospace & Defense stocks as well as other industrys.

Choosing Which of the 4 Best Aerospace & Defense Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• Air Industries Group stock has a Value Grade of B.
• SIFCO Industries, Inc. stock has a Value Grade of A.
• Tel-Instrument Electronics Corp. stock has a Value Grade of B.
• Textron Inc. stock has a Value Grade of B.

Now that you have a bit more background about each of the 4 undervalued stocks in the Aerospace & Defense industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Aerospace & Defense Stocks

Want to learn more about Aerospace & Defense stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 4 Undervalued Aerospace & Defense Stocks for Tuesday, November 19
• 3 Undervalued Aerospace & Defense Stocks for Monday, November 18
• 4 Undervalued Aerospace & Defense Stocks for Friday, November 15
• 3 Undervalued Aerospace & Defense Stocks for Thursday, November 07

AAII Disclaimer

We make no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown, because past, hypothetical or simulated performance is not necessarily indicative of future results. Before making an investment decision, you should consider your circumstances and whether the information on our content is applicable to your situation. This information was prepared in good faith and we accept no liability for any errors or omissions. The full disclaimer can be read here.