Head to Head Analysis: AAR (NYSE:AIR) & Mercury Systems (NASDAQ:MRCY)

Mercury Systems (NASDAQ:MRCY) and AAR (NYSE:AIR) are both mid-cap aerospace companies, but which is the superior stock? We will compare the two companies based on the strength of their risk, earnings, analyst recommendations, institutional ownership, valuation, dividends and profitability.

Analyst Ratings

This is a summary of current ratings and price targets for Mercury Systems and AAR, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Mercury Systems	2	3	3	2	2.50
AAR	0	2	4	1	2.86

Mercury Systems presently has a consensus target price of $89.89, indicating a potential downside of 4.92%. AAR has a consensus target price of $131.20, indicating a potential upside of 20.95%. Given AAR’s stronger consensus rating and higher probable upside, analysts clearly believe AAR is more favorable than Mercury Systems.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Mercury Systems	-1.46%	2.22%	1.32%
AAR	5.46%	12.39%	5.68%

Volatility & Risk

Mercury Systems has a beta of 0.83, meaning that its stock price is 17% less volatile than the S&P 500. Comparatively, AAR has a beta of 1.14, meaning that its stock price is 14% more volatile than the S&P 500.

Insider and Institutional Ownership

96.0% of Mercury Systems shares are owned by institutional investors. Comparatively, 90.7% of AAR shares are owned by institutional investors. 1.4% of Mercury Systems shares are owned by insiders. Comparatively, 3.6% of AAR shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Earnings and Valuation

This table compares Mercury Systems and AAR”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Mercury Systems	$912.02 million	6.22	-$37.90 million	($0.24)	-393.92
AAR	$2.78 billion	1.55	$12.50 million	$4.51	24.05

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

Summary

AAR beats Mercury Systems on 12 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 AAR

AAR Corp. provides products and services to commercial aviation, government, and defense markets worldwide. The Parts Supply segment leases and sells aircraft components and replacement parts. The Repair & Engineering segment provides airframe maintenance services, such as airframe inspection, painting, line maintenance, airframe modification, structural repair, avionics service and installation, exterior and interior refurbishment, and engineering and support services; component repair services comprising maintenance, repair, and overhaul (MRO) services, engine and airframe accessories, and interior refurbishment; and landing gear overhaul services, including repair services on wheels and brakes. This segment also develops specific aircraft components and parts; and designs proprietary designated engineering representative repairs. The Integrated Solutions segment engages in the fleet management and operation of customer-owned aircraft; provision of supply chain logistics services, such as material planning, sourcing, logistics, information and program management, and parts and component repair and overhaul services; and flight hour component inventory and repair services. In addition, the segment provides integrated software solutions comprising Trax, a cloud-based electronic enterprise resource platform, as well as a suite of paperless mobility apps for automating MRO workflows. The Expeditionary Services segment designs, manufactures, and repairs transportation pallets; and containers and shelters for military and humanitarian tactical deployment activities, including armories, supply and parts storage, refrigeration systems, tactical operation centers, briefing rooms, laundry and kitchen facilities, water treatment, and sleeping quarters, as well as engages in provision of engineering, design, and system integration services for specialized command and control systems. AAR Corp. was founded in 1951 and is headquartered in Wood Dale, Illinois.