Better Buy: Raytheon Company vs. Northrop Grumman
Defense stocks have come back into the public eye lately, with the Trump administration looking to increase the defense budget to support the U.S. military. Both Raytheon (NYSE: RTN) and Northrop Grumman (NYSE: NOC) will be interested in getting new business from a ramp-up in military spending, and both are likely to get their fair share of any budget increase. Investors want to know whether one of the companies is likely to have an edge over the other from the standpoint of better return on their shares. Below, you'll see Raytheon and Northrop Grumman compared on various metrics designed to show you which one looks like the right pick right now.
Both Raytheon and Northrop Grumman have seen their shares rise in response to the more favorable outlook for defense spending. Since July 2016, Raytheon has delivered a 25% return to its shareholders. Northrop lags just behind with a 20% rise in its share price over the same period.
Looking at valuations, the slightly weaker performance for Northrop Grumman translates into a slightly more attractive share price as measured against its earnings prospects. Based on what it has brought in over the past 12 months, Northrop trades at 21 times trailing earnings, compared to an earnings multiple of 22 for Raytheon. The story stays largely the same when you look at near-term future projections for the bottom line. Northrop's forward multiple weighs in at 19, compared to Raytheon's 20. The two stocks are close enough in terms of valuation and recent performance to be nearly indistinguishable.
Source: Fool.com
