Analyzing AeroVironment (AVAV) and Raytheon (RTN)

AeroVironment (NASDAQ: AVAV) and Raytheon (NYSE:RTN) are both industrials companies, but which is the superior stock? We will contrast the two companies based on the strength of their valuation, analyst recommendations, risk, dividends, institutional ownership, earnings and profitability.

Institutional and Insider Ownership

77.2% of AeroVironment shares are held by institutional investors. Comparatively, 73.9% of Raytheon shares are held by institutional investors. 11.0% of AeroVironment shares are held by company insiders. Comparatively, 0.2% of Raytheon shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Risk & Volatility

AeroVironment has a beta of 1.24, meaning that its share price is 24% more volatile than the S&P 500. Comparatively, Raytheon has a beta of 0.57, meaning that its share price is 43% less volatile than the S&P 500.

Dividends

Raytheon pays an annual dividend of $3.19 per share and has a dividend yield of 1.7%. AeroVironment does not pay a dividend. Raytheon pays out 42.9% of its earnings in the form of a dividend. Raytheon has increased its dividend for 12 consecutive years.

Analyst Ratings

This is a summary of current ratings and price targets for AeroVironment and Raytheon, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
AeroVironment 0 4 0 0 2.00
Raytheon 0 2 13 0 2.87

AeroVironment currently has a consensus price target of $39.00, indicating a potential downside of 13.33%. Raytheon has a consensus price target of $200.73, indicating a potential upside of 7.89%. Given Raytheon’s stronger consensus rating and higher probable upside, analysts clearly believe Raytheon is more favorable than AeroVironment.

Earnings and Valuation

This table compares AeroVironment and Raytheon’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
AeroVironment $264.87 million 4.05 $12.47 million $0.80 56.25
Raytheon $24.07 billion 2.23 $2.21 billion $7.44 25.01

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

Profitability

This table compares AeroVironment and Raytheon’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
AeroVironment 7.22% 5.40% 4.83%
Raytheon 8.77% 20.98% 7.34%

Summary

Raytheon beats AeroVironment on 11 of the 17 factors compared between the two stocks.

About AeroVironment

AeroVironment, Inc. designs, develops, produces, supports and operates a portfolio of products and services for government agencies, businesses and consumers. The Company operates through two segments: Unmanned Aircraft Systems (UAS), which focuses primarily on the design, development, production, support and operation of UAS and tactical missile systems that provide situational awareness, multi-band communications, force protection and other mission effects, and Efficient Energy Systems (EES), which focuses primarily on the design, development, production, marketing, support and operation of electric energy systems. The Company supplies UAS, tactical missile systems and related services primarily to organizations within the United States Department of Defense (DoD). The Company also supplies charging systems and services for electric vehicles (EVs), and power cycling and test systems to commercial, consumer and government customers.

About Raytheon

Raytheon Company is a technology company, which specializes in defense and other government markets. The Company develops integrated products, services and solutions in various markets, including sensing; effects; command, control, communications, computers, cyber and intelligence; mission support, and cybersecurity. The Company operates through five segments: Integrated Defense Systems (IDS); Intelligence, Information and Services (IIS); Missile Systems (MS); Space and Airborne Systems (SAS), and Forcepoint. The IDS segment develops and produces sensors and mission systems. The IIS segment provides a range of technical and professional services to intelligence, defense, federal and commercial customers. The MS segment is a developer, integrator and producer of missile and combat systems. The SAS segment is engaged in the design, development and manufacture of integrated sensor and communication systems for missions. The Forcepoint segment develops cybersecurity products.

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