Reviewing Leidos (LDOS) and CAE (CAE)

Leidos (NYSE: LDOS) and CAE (NYSE:CAE) are both mid-cap aerospace companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, valuation, earnings, analyst recommendations, profitability, risk and dividends.

Analyst Recommendations

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This is a summary of current ratings and recommmendations for Leidos and CAE, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Leidos 0 1 7 0 2.88
CAE 0 2 2 0 2.50

Leidos presently has a consensus target price of $72.13, indicating a potential upside of 11.20%. CAE has a consensus target price of $22.00, indicating a potential upside of 17.33%. Given CAE’s higher probable upside, analysts clearly believe CAE is more favorable than Leidos.

Dividends

Leidos pays an annual dividend of $1.28 per share and has a dividend yield of 2.0%. CAE pays an annual dividend of $0.29 per share and has a dividend yield of 1.5%. Leidos pays out 34.4% of its earnings in the form of a dividend. CAE pays out 36.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. CAE has raised its dividend for 2 consecutive years. Leidos is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings and Valuation

This table compares Leidos and CAE’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Leidos $10.17 billion 0.97 $366.00 million $3.72 17.44
CAE $2.06 billion 2.44 $191.59 million $0.79 23.73

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

Risk & Volatility

Leidos has a beta of 1.61, indicating that its stock price is 61% more volatile than the S&P 500. Comparatively, CAE has a beta of 0.76, indicating that its stock price is 24% less volatile than the S&P 500.

Profitability

This table compares Leidos and CAE’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Leidos 3.60% 17.47% 6.38%
CAE 11.31% 13.03% 5.20%

Insider and Institutional Ownership

73.1% of Leidos shares are owned by institutional investors. Comparatively, 52.1% of CAE shares are owned by institutional investors. 1.7% of Leidos shares are owned by insiders. Comparatively, 18.3% of CAE shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Summary

Leidos beats CAE on 11 of the 17 factors compared between the two stocks.

About Leidos

Leidos Holdings, Inc. provides services and solutions in the defense, intelligence, civil, and health markets primarily in the United States. The company operates through three segments: Defense Solutions, Civil, and Health. The Defense Solutions segment offers national security solutions and systems for air, land, sea, space, and cyberspace for the U.S. intelligence community, Department of Defense, military services, the U.S. Department of Homeland Security, and government agencies of U.S. allies abroad, as well as other federal, civilian, and commercial customers in national security industry. Its solutions include technology, intelligence systems, command and control, data analytics, logistics, and cybersecurity solutions, as well as intelligence analysis and operations support services to critical missions. The Civil segment provides systems integration services to Air Navigation Service providers, including the Federal Aviation Administration, Transportation Security Administration, and airport operators; vehicle and cargo inspection system, which enables the scanning of vehicles and cargo that produces a image using a low radiation dose; IT solutions in cloud computing, mobility, application modernization, DevOps, data center, network modernization, asset management, help desk operations, and digital workplace enablement; federal environment and infrastructure; and logistics services. The Health segment offers solutions to federal and commercial customers responsible for health and well-being of people worldwide, including complex systems integration, managed health services, enterprise IT transformation, and life sciences services. The company was founded in 1969 and is headquartered in Reston, Virginia.

About CAE

CAE Inc. provides training for the civil aviation, defense and security, and healthcare markets. The Company designs and integrates training solutions. It operates through three segments: Civil Aviation Training Solutions, Defense and Security, and Healthcare. The Company provides training solutions for flight, cabin, maintenance and ground personnel in commercial, business and helicopter aviation, a range of flight simulation training devices, as well as ab initio pilot training and crew sourcing services. The Company is a training systems integrator for defense forces across the air, land and sea domains, and for government and civil security organizations responsible for public safety. The Company designs, manufactures and markets simulators, simulation center management solutions and courseware for training of medical and allied healthcare students and clinicians in educational institutions, hospitals and defense organizations across the world.

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