Should You Pick Howmet Over Textron Stock?

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2023-09-19 05:09:39  • 5 mins

We believeHowmet Aerospace stock (NYSE: HWM), an aerospace company that manufactures components for jet engines, is a better pick than its sector peer, Textron stock (NYSE: TXT), given its better prospects. Howmet trades at a higher valuation multiple of 3.2xrevenues vs.1.1x for Textron, partly due to its superior profitability.

Interestingly, Textron has had a Sharpe Ratio of 0.3since early 2017, while the figure stood at0.4 for Howmet, lower than 0.6 for the S&P 500 Index over the same period. This compares with the Sharpe of 1.3for the TrefisReinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.

Looking at stock returns, TXT has underperformed with 7% returns this year, compared to 19% gains for HWM and a 16% rise in the S&P500 index. There is more to the comparison, and in the sections below, we discuss why we believe that Howmet will offer better returns than Textron in the next three years. We compare a slew of factors, such as historical revenue growth, returns, and valuation, in an interactive dashboard analysis of Textron vs. Howmet:Which Stock Is A Better Bet?Parts of the analysis are summarized below.

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