Critical Review: Leonardo DRS (NASDAQ:DRS) versus CAE (NYSE:CAE)

CAE (NYSE:CAE) and Leonardo DRS (NASDAQ:DRS) are both large-cap aerospace companies, but which is the better stock? We will contrast the two businesses based on the strength of their analyst recommendations, risk, earnings, profitability, valuation, dividends and institutional ownership.

Risk & Volatility

CAE has a beta of 1.15, indicating that its stock price is 15% more volatile than the S&P 500. Comparatively, Leonardo DRS has a beta of 0.44, indicating that its stock price is 56% less volatile than the S&P 500.

Valuation and Earnings

This table compares CAE and Leonardo DRS”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
CAE	$3.28 billion	3.34	$291.29 million	$0.97	35.13
Leonardo DRS	$3.23 billion	3.50	$213.00 million	$0.98	43.44

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

Institutional and Insider Ownership

67.4% of CAE shares are held by institutional investors. Comparatively, 18.8% of Leonardo DRS shares are held by institutional investors. 18.3% of CAE shares are held by company insiders. Comparatively, 0.3% of Leonardo DRS shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of current ratings and target prices for CAE and Leonardo DRS, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
CAE	0	6	4	2	2.67
Leonardo DRS	0	3	6	0	2.67

CAE presently has a consensus price target of $34.33, indicating a potential upside of 0.74%. Leonardo DRS has a consensus price target of $47.14, indicating a potential upside of 10.74%. Given Leonardo DRS’s higher probable upside, analysts plainly believe Leonardo DRS is more favorable than CAE.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
CAE	8.98%	7.60%	3.41%
Leonardo DRS	7.43%	11.37%	7.11%

About CAE

CAE Inc., together with its subsidiaries, provides simulation training and critical operations support solutions in Canada, the United States, the United Kingdom, Europe, Asia, the Oceania, Africa, and Rest of the Americas. It operates through two segments, Civil Aviation; and Defense and Security. The Civil Aviation segment offers training solutions for flight, cabin, maintenance, and ground personnel in commercial, business, and helicopter aviation; a range of flight simulation training devices; and ab initio pilot training and crew sourcing services, as well as aircraft flight operations solutions. The Defense and Security segment operates as a training and simulation provider that delivers platform-independent solutions to enable and enhance force readiness and security for defense forces, original equipment manufacturers (OEMs), government agencies, and public safety organizations. The company was formerly known as CAE Industries Ltd. and changed its name to CAE Inc. in 1993. CAE Inc. was incorporated in 1947 and is headquartered in Saint-Laurent, Canada.

About Leonardo DRS

Leonardo DRS, Inc., together with its subsidiaries, provides defense electronic products and systems, and military support services. It operates through Advanced Sensing and Computing (ASC) segment, and Integrated Mission Systems (IMS) segments. The ASC segment designs, develops, and manufacture sensing and network computing technology that enables real-time situational awareness required for enhanced operational decision making and execution; and offers sensing capabilities span applications, such as missions requiring advanced detection, precision targeting and surveillance sensing, long range electro-optic/infrared, signals intelligence, and other intelligence systems including electronic warfare, ground vehicle sensing, active electronically scanned array tactical radars, dismounted soldier, and space sensing. This segment also provides network computing, which are utilized across a range of mission applications including platform computing on ground and shipboard for advanced battle management, combat systems, radar, command and control, tactical networks, tactical computing, and communications. The IMS segment designs, develops, manufacture, and integrates power conversion, control, and distribution systems, ship propulsion systems, motors and variable frequency drives, force protection systems, transportation, and logistics systems for the U.S. and allied defense customers. This segment also offers electrical propulsion systems, which includes power conversion, control, distribution, and propulsion systems, as well as power dense permanent magnet motors, energy storage systems and associated efficient, rugged, and compact power conversion, electrical actuation systems, as well as cooling technologies; and motor controllers, instrumentation and control equipment, electrical actuation systems, and thermal management systems. The company was incorporated in 1968 and is based in Arlington, Virginia. Leonardo DRS, Inc. operates as a subsidiary of Leonardo S.p.A.