Northrop Grumman (NYSE: NOC) and Mercury Systems (NASDAQ:MRCY) are both mid-cap industrials companies, but which is the better business? We will contrast the two companies based on the strength of their earnings, profitability, analyst recommendations, institutional ownership, dividends, valuation and risk.

Analyst Ratings

This is a summary of current ratings and recommmendations for Northrop Grumman and Mercury Systems, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Northrop Grumman 0 5 9 0 2.64
Mercury Systems 0 2 5 0 2.71

Northrop Grumman currently has a consensus price target of $301.39, indicating a potential downside of 2.22%. Mercury Systems has a consensus price target of $50.20, indicating a potential downside of 1.76%. Given Mercury Systems’ stronger consensus rating and higher possible upside, analysts clearly believe Mercury Systems is more favorable than Northrop Grumman.

Profitability

This table compares Northrop Grumman and Mercury Systems’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Northrop Grumman 9.24% 39.76% 8.94%
Mercury Systems 9.14% 6.51% 5.12%

Insider and Institutional Ownership

81.1% of Northrop Grumman shares are held by institutional investors. Comparatively, 96.3% of Mercury Systems shares are held by institutional investors. 0.7% of Northrop Grumman shares are held by insiders. Comparatively, 3.5% of Mercury Systems shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Valuation and Earnings

This table compares Northrop Grumman and Mercury Systems’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Northrop Grumman $24.51 billion 2.19 $2.20 billion $13.42 22.97
Mercury Systems $408.59 million 6.03 $24.87 million $0.86 59.42

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

Volatility & Risk

Northrop Grumman has a beta of 0.69, meaning that its stock price is 31% less volatile than the S&P 500. Comparatively, Mercury Systems has a beta of 0.23, meaning that its stock price is 77% less volatile than the S&P 500.

Dividends

Northrop Grumman pays an annual dividend of $4.00 per share and has a dividend yield of 1.3%. Mercury Systems does not pay a dividend. Northrop Grumman pays out 29.8% of its earnings in the form of a dividend. Northrop Grumman has increased its dividend for 9 consecutive years.

Summary

Northrop Grumman beats Mercury Systems on 10 of the 17 factors compared between the two stocks.

About Northrop Grumman

Northrop Grumman Corporation is a global security company. The Company provides products, systems and solutions in autonomous systems; cyber; command, control, communications and computers, intelligence, surveillance and reconnaissance (C4ISR); strike, and logistics and modernization. The Company’s segments include Aerospace Systems, Mission Systems and Technology Services. The Company’s Aerospace Systems segment is engaged in the design, development, integration and production of manned aircraft, autonomous systems, spacecraft, high-energy laser systems, microelectronics and other systems/subsystems. The Mission Systems segment offers mission solutions and multifunction systems for Department of Defense (DoD), intelligence community, international, federal civil and commercial customers. The Technology Services segment provides logistics solutions supporting the full life cycle of platforms and systems for global defense and federal-civil customers.

About Mercury Systems

Mercury Systems, Inc. is a commercial provider of secure processing subsystems designed and made in the United States. The Company’s solutions support a range of defense and intelligence programs. Its technologies include embedded processing modules and subsystems, radio frequency (RF) and microwave multi-function assemblies, as well as subsystems, and RF and microwave components. It designs and builds RF and microwave components and subsystems for the electronic warfare (EW), signals intelligence (SIGINT) and other communications requirements and applications. It offers analyst services and systems engineering support, consulting, maintenance and other support, testing and installation. It designs, markets and sells software and middleware environments for the development and execution of signal and image processing applications on a range of heterogeneous and multi-computing platforms. It also offers solutions in mission computing, safety-critical avionics and platform management.

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