Investors with an interest in Aerospace - Defense Equipment stocks have likely encountered both Bae Systems PLC (BAESY) and Heico Corporation (HEI). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Both Bae Systems PLC and Heico Corporation have a Zacks Rank of # 2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one piece of the puzzle for value investors.

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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

BAESY currently has a forward P/E ratio of 19.81, while HEI has a forward P/E of 71.50. We also note that BAESY has a PEG ratio of 1.59. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. HEI currently has a PEG ratio of 3.69.

Another notable valuation metric for BAESY is its P/B ratio of 3.91. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, HEI has a P/B of 10.05.

Based on these metrics and many more, BAESY holds a Value grade of B, while HEI has a Value grade of F.

Both BAESY and HEI are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that BAESY is the superior value option right now.

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