Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 3 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.

Latest Aerospace & Defense Stock News

Before choosing which top Aerospace & Defense stock to buy, be sure to conduct proper due diligence: analyze various financial metrics and look at historical data, public statements and news coverage.

Our fundamental outlook for the Aerospace & Defense (A&D) industry over the next 12 months is neutral. There is expectation for healthy growth in U.S. defense spending to drive strong earnings for defense businesses that make up roughly 65% of sub-industry revenue. Much of this boost will likely be offset by a continued downturn in commercial aerospace, though, with another one to two years still needed for commercial aircraft demand to recover to pre-pandemic levels. In April 2021, President Biden requested a 2% defense budget increase over the record FY 21 budget set under former President Trump. Then in July, the Democrat-controlled Senate Armed Services Committee voted overwhelmingly (23-3) to increase the FY 22 defense budget an even greater amount (+5%) than Biden. This reflects strong bipartisan support for Pentagon initiatives to maintain sea, air, and space superiority. After defense, an estimated 35% of A&D revenues come from commercial aerospace, where slack demand will likely persist through 2022. The pandemic has devastated the subindustry’s airline customers, with U.S. passenger volumes still 20% below prepandemic levels as of mid-August 2021.

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.

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3 Undervalued Aerospace & Defense Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 3 undervalued stocks in the Aerospace & Defense industry for Tuesday, June 13, 2023. 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 is a holding company with three subsidiaries, Air Industries Machining Corp. (AIM), Nassau Tool Works, Inc. (NTW) and the Sterling Engineering Company (SEC). The Company manufactures aerospace components primarily for the aerospace and defense industry. Its AIM and NTW manufacture structural parts and assemblies focusing on flight safety, including aircraft landing gear, arresting gear, engine mounts, flight controls, throttle quadrants and other components. SEC makes components and provides services for aircraft jet engines and ground-power turbines. AIM and NTW offers its products to a range of military and commercial aircraft, including the Sikorsky UH-60 Blackhawk, Lockheed Martin F-35 Joint Strike Fighter and Northrop Grumman E2D Hawkeye, and others. They also make a critical component for the Pratt & Whitney Geared TurboFan aircraft engine used on commercial airliners. SEC makes products used in jet engines that are used on military and commercial aircraft.

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 69, which is considered to be undervalued.

When you look at Air Industries Group’s price-to-sales ratio at 0.21 compared to the industry median at 1.87, 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 15.5, when compared to the industry median of 14.4, the company may be considered overvalued 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 higher than its industry median ratio of (1.31%). 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 2.40. This could make Air Industries Group more attractive to investors looking for a new addition to their portfolio.

Environmental Tectonics Corp’s Value Grade

Value Grade:

Environmental Tectonics Corporation provides engineering solutions to its customers with products, service, and support. The Company's Aerospace Solutions (Aerospace) segment encompasses the design, manufacture, and sale of aircrew training systems (ATS) products; altitude (hypobaric) chambers; hyperbaric chambers for multiple persons (multiplace chambers); and advanced disaster management simulators (ADMS), as well as integrated logistics support (ILS) for customers who purchase these products or similar products manufactured by other parties. Its Commercial/Industrial Systems (CIS) segment encompasses the design, manufacture, and sale of steam and gas (ethylene oxide) sterilizers; and environmental testing and simulation systems (ETSS), as well as parts and service support for customers who purchase these products or similar products manufactured by other parties. The Company sells its sterilizers to medical device manufacturers, pharmaceutical manufacturers, and universities.

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.

Environmental Tectonics Corp has a Value Score of 89, which is considered to be undervalued.

Environmental Tectonics Corp’s price-earnings ratio is 11.3 compared to the industry median at 22.0. This means that it has a lower price relative to its earnings compared to its peers. This makes Environmental Tectonics Corp more attractive for value investors.

You can read more about Environmental Tectonics 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.

Triumph Group Inc’s Value Grade

Value Grade:

Triumph Group, Inc. designs, engineers, manufactures, repairs and overhauls a portfolio of aerospace and defense systems, components and structures. The Company serves the global aviation industry, including original equipment manufacturers and the full spectrum of military and commercial aircraft operators. The Company offers a variety of products and services to the aerospace industry. The Company operates through two segments. Triumph Systems & Support segment designs, develops and supports components, subsystems and systems; provides complex assemblies using external designs; and provides full life cycle solutions for commercial, regional and military aircraft. Triumph Interiors segment supplies commercial and regional manufacturers with aircraft interior systems, including air ducting and thermal acoustic insulation systems. Its Systems and Supports capabilities include hydraulic, mechanical, and electromechanical actuation.

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.

Triumph Group Inc has a Value Score of 63, which is considered to be undervalued.

Triumph Group Inc’s price-earnings ratio is 9.0 compared to the industry median at 22.0. This means that it has a lower price relative to its earnings compared to its peers. This makes Triumph Group Inc more attractive for value investors.

You can read more about Triumph Group 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 3 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.
• Environmental Tectonics Corp stock has a Value Grade of A.
• Triumph Group Inc stock has a Value Grade of B.

Now that you have a bit more background about each of the 3 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.

• 3 Undervalued Aerospace & Defense Stocks for Tuesday, June 13
• 4 Undervalued Aerospace & Defense Stocks for Monday, June 12
• Why EHang Holdings Ltd - ADR’s (EH) Stock Is Up 7.35%
• 3 Undervalued Aerospace & Defense Stocks for Friday, June 09

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.