Critical Review: BAE Systems (OTCMKTS:BAESY) versus Japan Tobacco (OTCMKTS:JAPAY)

BAE Systems (OTCMKTS:BAESY) and Japan Tobacco (OTCMKTS:JAPAY) are both aerospace companies, but which is the superior stock? We will contrast the two businesses based on the strength of their analyst recommendations, profitability, institutional ownership, risk, dividends, valuation and earnings.

Risk & Volatility

BAE Systems has a beta of 0.56, suggesting that its stock price is 44% less volatile than the S&P 500. Comparatively, Japan Tobacco has a beta of 0.41, suggesting that its stock price is 59% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and price targets for BAE Systems and Japan Tobacco, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
BAE Systems	1	1	3	0	2.40
Japan Tobacco	0	1	0	0	2.00

BAE Systems presently has a consensus price target of $475.00, suggesting a potential upside of 597.61%. Japan Tobacco has a consensus price target of $10.00, suggesting a potential downside of 25.87%. Given BAE Systems’ stronger consensus rating and higher probable upside, analysts plainly believe BAE Systems is more favorable than Japan Tobacco.

Dividends

BAE Systems pays an annual dividend of $1.81 per share and has a dividend yield of 2.7%. Japan Tobacco pays an annual dividend of $0.45 per share and has a dividend yield of 3.3%. Japan Tobacco pays out 45.9% of its earnings in the form of a dividend.

Earnings and Valuation

This table compares BAE Systems and Japan Tobacco’s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
BAE Systems	$24.98 billion	2.06	$2.31 billion	N/A	N/A
Japan Tobacco	$20.26 billion	N/A	$3.42 billion	$0.98	13.77

Japan Tobacco has lower revenue, but higher earnings than BAE Systems.

Institutional and Insider Ownership

0.2% of BAE Systems shares are owned by institutional investors. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares BAE Systems and Japan Tobacco’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
BAE Systems	N/A	N/A	N/A
Japan Tobacco	17.17%	12.48%	6.96%

Summary

BAE Systems beats Japan Tobacco on 7 of the 12 factors compared between the two stocks.

About BAE Systems

BAE Systems plc provides defense, aerospace, and security solutions worldwide. The company operates through five segments: Electronic Systems, Platforms & Services, Air, Maritime, and Cyber & Intelligence. The Electronic Systems segment offers electronic warfare systems, navigation systems, electro-optical sensors, military and commercial digital engine and flight controls, precision guidance and seeker solutions, military communication systems and data links, persistent surveillance capabilities, space electronics, and electric drive propulsion systems. The Cyber & Intelligence segment provides solutions to modernize, maintain, and test cyber-harden aircraft, radars, missile systems, and mission applications that detect and deter threats to national security; systems engineering, integration, and sustainment services for critical weapons systems, C5ISR, and cyber security; and solutions and services to intelligence and federal/civilian agencies. It also offers data intelligence solutions to protect nations, businesses, and citizens. The Platforms & Services segment manufactures, and upgrades combat vehicles, weapons, and munitions, as well as provides naval ship repair services and the management of government-owned ammunition plants. The Air segment develops future combat air systems and falconworks. The Maritime segment provides maritime and land activities, including submarine, ship build, and support programmes. BAE Systems plc was founded in 1970 and is headquartered in Camberley, the United Kingdom.

About Japan Tobacco

Japan Tobacco Inc., a tobacco company, manufactures and sells tobacco products, pharmaceuticals, and processed foods in Japan and internationally. The company operates through three segments: Tobacco Business, Pharmaceutical, and Processed Food. It offers tobacco products, such as cigarettes, heat-not-burn tobacco products, E-vapor products, fine cut tobacco products, cigars, pipes, smokeless tobacco products, and hookah and kretek products. The company also provides reduced-risk products, including infused tobacco capsules and heated tobacco sticks. In addition, it researches and develops, manufactures, and sells prescription drugs for the therapeutic areas, such as cardiovascular, kidney and metabolism, immunity/inflammation, and central nervous system. Further, the company provides frozen and room-temperature products, such as frozen udon noodles, packed rice, and frozen okonomiyaki; bakery products; and seasonings, including yeast extracts, assembled, kelp and bonito extracts, and oyster sauces. It offers its products under the Winston, Camel, MEVIUS, and LD brands. Japan Tobacco Inc. was incorporated in 1985 and is headquartered in Tokyo, Japan.