Analyzing Heico (NYSE:HEI.A) and Leonardo DRS (NASDAQ:DRS)

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

Institutional & Insider Ownership

59.0% of Heico shares are owned by institutional investors. Comparatively, 18.8% of Leonardo DRS shares are owned by institutional investors. 9.8% of Heico shares are owned by company insiders. Comparatively, 0.3% of Leonardo DRS shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Heico and Leonardo DRS, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Heico	0	1	0	1	3.00
Leonardo DRS	0	4	3	1	2.63

Leonardo DRS has a consensus target price of $52.00, suggesting a potential upside of 9.82%. Given Leonardo DRS’s higher possible upside, analysts plainly believe Leonardo DRS is more favorable than Heico.

Dividends

Heico pays an annual dividend of $0.24 per share and has a dividend yield of 0.1%. Leonardo DRS pays an annual dividend of $0.36 per share and has a dividend yield of 0.8%. Heico pays out 4.3% of its earnings in the form of a dividend. Leonardo DRS pays out 33.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Heico	16.08%	17.52%	8.86%
Leonardo DRS	7.85%	12.02%	7.59%

Valuation and Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Heico	$4.49 billion	7.52	$690.39 million	$5.60	43.10
Leonardo DRS	$3.65 billion	3.46	$278.00 million	$1.07	44.25

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

Risk and Volatility

Heico has a beta of 1.07, indicating that its stock price is 7% more volatile than the S&P 500. Comparatively, Leonardo DRS has a beta of 0.34, indicating that its stock price is 66% less volatile than the S&P 500.

Summary

Heico beats Leonardo DRS on 12 of the 16 factors compared between the two stocks.

About Heico

HEICO Corporation, through its subsidiaries, designs, manufactures, and sells aerospace, defense, and electronic related products and services in the United States and internationally. The company's Flight Support Group segment provides jet engine and aircraft component replacement parts; thermal insulation blankets and parts; renewable/reusable insulation systems; and specialty components. This segment also distributes hydraulic, pneumatic, structural, interconnect, mechanical, and electro-mechanical components for the commercial, regional, and general aviation markets; and offers repair and overhaul services for jet engine and aircraft component parts, avionics, instruments, composites, and flight surfaces of commercial aircraft, as well as for avionics and navigation systems, subcomponents, and other instruments utilized on military aircraft. Its Electronic Technologies Group segment provides electro-optical infrared simulation and test equipment; electro-optical laser products; electro-optical, microwave, and other power equipment; electromagnetic and radio interference shielding and suppression filters; high-speed interface products; high voltage interconnection devices; high voltage advanced power electronics; power conversion products; and underwater locator beacons and emergency locator transmission beacons. This segment also offers traveling wave tube amplifiers and microwave power modules; three-dimensional microelectronic and stacked memory products; harsh environment connectivity products and custom molded cable assemblies; radio frequency and microwave amplifiers, transmitters, and receivers; communications and electronic intercept receivers and tuners; self-sealing auxiliary fuel systems; active antenna systems; and nuclear radiation detectors. The company serves customers primarily in the aviation, defense, space, medical, telecommunications, and electronics industries. HEICO Corporation was founded in 1957 and is headquartered in Hollywood, Florida.

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.