Critical Review: Mercury Systems (NASDAQ:MRCY) versus Transdigm Group (NYSE:TDG)

Mercury Systems (NASDAQ:MRCY) and Transdigm Group (NYSE:TDG) are both industrials companies, but which is the superior stock? We will compare the two companies based on the strength of their dividends, analyst recommendations, profitability, valuation, earnings, risk and institutional ownership.

Analyst Ratings

This is a summary of recent recommendations and price targets for Mercury Systems and Transdigm Group, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Mercury Systems	2	4	5	1	2.42
Transdigm Group	0	12	6	0	2.33

Mercury Systems presently has a consensus target price of $110.10, suggesting a potential upside of 35.79%. Transdigm Group has a consensus target price of $1,454.87, suggesting a potential upside of 30.83%. Given Mercury Systems’ stronger consensus rating and higher probable upside, equities analysts plainly believe Mercury Systems is more favorable than Transdigm Group.

Volatility and Risk

Mercury Systems has a beta of 0.98, suggesting that its stock price is 2% less volatile than the S&P 500. Comparatively, Transdigm Group has a beta of 0.91, suggesting that its stock price is 9% less volatile than the S&P 500.

Insider and Institutional Ownership

96.0% of Mercury Systems shares are owned by institutional investors. Comparatively, 95.8% of Transdigm Group shares are owned by institutional investors. 1.4% of Mercury Systems shares are owned by insiders. Comparatively, 3.2% of Transdigm Group shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares Mercury Systems and Transdigm Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Mercury Systems	-3.02%	1.29%	0.78%
Transdigm Group	19.69%	-23.65%	9.12%

Earnings & Valuation

This table compares Mercury Systems and Transdigm Group”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Mercury Systems	$983.62 million	4.96	-$29.67 million	($0.50)	-162.16
Transdigm Group	$8.83 billion	7.04	$2.07 billion	$32.96	33.74

Transdigm Group has higher revenue and earnings than Mercury Systems. Mercury Systems is trading at a lower price-to-earnings ratio than Transdigm Group, indicating that it is currently the more affordable of the two stocks.

Summary

Transdigm Group beats Mercury Systems on 9 of the 15 factors compared between the two stocks.

About Mercury Systems

Mercury Systems, Inc., a technology company, manufactures and sells components, products, modules, and subsystems for aerospace and defense industries in the United States, Europe, and the Asia Pacific. Its products and solutions are deployed in approximately 300 programs with 25 defense contractors and commercial aviation customers. The company offers components, including power amplifiers and limiters, switches, oscillators, filters, equalizers, digital and analog converters, chips, monolithic microwave integrated circuits, and memory and storage devices; modules and sub-assemblies, such as embedded processing boards, switched fabrics and boards, digital receivers, multi-chip modules, integrated radio frequency and microwave multi-function assemblies, tuners, and transceivers, as well as graphics and video boards; and integrated subsystems. It also designs and develops digital radio frequency memory units for various modern electronic warfare applications; radar environment simulation and test systems for defense and intelligence applications; and signals intelligence payloads and EO/IR technologies for small UAV platforms, as well as onboard UAV processor systems for real-time wide area motion imagery. The company was formerly known as Mercury Computer Systems, Inc. and changed its name to Mercury Systems, Inc. in November 2012. The company was incorporated in 1981 and is headquartered in Andover, Massachusetts.

About Transdigm Group

TransDigm Group Incorporated designs, produces, and supplies aircraft components in the United States and internationally. The Power & Control segment offers mechanical/electro-mechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, batteries and chargers, databus and power controls, sensor products, switches and relay panels, hoists, winches and lifting devices, and cargo loading and handling systems. This segment serves engine and power system and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies, and repair depots. The Airframe segment provides engineered latching and locking devices, engineered rods, engineered connectors and elastomer sealing solutions, cockpit security components and systems, cockpit displays, engineered audio, radio and antenna systems, lavatory components, seat belts and safety restraints, engineered and customized interior surfaces and related components, thermal protection and insulation products, lighting and control technology, and parachutes. This segment serves airframe manufacturers, cabin system and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies, and repair depots. The Non-aviation segment offers seat belts and safety restraints for ground transportation applications; electro-mechanical actuators for space applications; hydraulic/electromechanical actuators and fuel valves for land-based gas turbines; refueling systems for heavy equipment used in mining, construction, and other industries; and turbine controls for the energy and oil and gas markets. This segment serves off-road vehicle and subsystem suppliers, child restraint system suppliers, and satellite and space system suppliers; and manufacturers of heavy equipment. TransDigm Group Incorporated was founded in 1993 and is based in Cleveland, Ohio.