Is Huntington Ingalls Industries a Buy?

Huntington Ingalls Industries (NYSE: HII), usually about the closest thing to a value play among defense contractors, has enjoyed a breakout year thanks to increased talk about the need to expand the U.S. Navy. Even after the run-up, patient investors could do well climbing aboard at these levels.

The company is the rare modern defense contractor that is not diversified, and its core shipbuilding business is a very long-range endeavor with little chance for rapid growth. Huntington Ingalls, which was spun out of Northrop Grumman in 2011, through most of its history has traded at a price-to-earnings and price-to-sales discount to other defense contractors. That's still true today, though a flurry of talk about growing the U.S. Navy's fleet has helped the company's shares -- up 37% -- to outpace its defense rivals over the past year.

That expansion talk, unfortunately, seems overblown. But there are still good reasons to hope Huntington Ingalls can justify the increasingly optimistic outlook.

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Source: Fool.com