Critical Review: DigitalGlobe (DGI) and Elbit Systems (ESLT)

Elbit Systems (NASDAQ: ESLT) and DigitalGlobe (NYSE:DGI) are both mid-cap aerospace companies, but which is the better business? We will contrast the two businesses based on the strength of their risk, valuation, earnings, dividends, institutional ownership, profitabiliy and analyst recommendations.

Valuation and Earnings

This table compares Elbit Systems and DigitalGlobe’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Elbit Systems $3.29 billion 1.62 $404.77 million $5.39 23.10
DigitalGlobe $759.70 million 2.63 $384.00 million $0.16 201.58

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

Volatility and Risk

Elbit Systems has a beta of 0.62, suggesting that its stock price is 38% less volatile than the S&P 500. Comparatively, DigitalGlobe has a beta of 0.96, suggesting that its stock price is 4% less volatile than the S&P 500.

Insider and Institutional Ownership

10.8% of Elbit Systems shares are owned by institutional investors. Comparatively, 99.0% of DigitalGlobe shares are owned by institutional investors. 0.8% of Elbit Systems shares are owned by insiders. Comparatively, 1.9% of DigitalGlobe shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of current ratings for Elbit Systems and DigitalGlobe, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Elbit Systems 0 2 0 0 2.00
DigitalGlobe 0 4 2 0 2.33

Elbit Systems currently has a consensus price target of $112.50, suggesting a potential downside of 9.63%. DigitalGlobe has a consensus price target of $31.58, suggesting a potential downside of 2.07%. Given DigitalGlobe’s stronger consensus rating and higher probable upside, analysts plainly believe DigitalGlobe is more favorable than Elbit Systems.

Dividends

Elbit Systems pays an annual dividend of $1.76 per share and has a dividend yield of 1.4%. DigitalGlobe does not pay a dividend. Elbit Systems pays out 32.7% of its earnings in the form of a dividend.

Profitability

This table compares Elbit Systems and DigitalGlobe’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Elbit Systems 7.00% 16.45% 5.86%
DigitalGlobe 2.00% 3.24% 1.32%

Summary

DigitalGlobe beats Elbit Systems on 9 of the 16 factors compared between the two stocks.

About Elbit Systems

Elbit Systems Ltd. is an international technology company engaged in a range of programs across the world. The Company develops and supplies a portfolio of airborne, land and naval systems and products for defense, homeland security and commercial aviation applications. Its systems and products are installed on new platforms, and it also performs platform modernization programs. In addition, it provides a range of support services. The Company’s activities include military aircraft and helicopter systems; helmet mounted systems; commercial aviation systems and aerostructures; unmanned aircraft and unmanned surface vessels; land vehicle systems; command, control, communications, computer and intelligence (C4I) systems; intelligence and cyber systems; electro-optic and countermeasures systems; electronic warfare and signal intelligence systems, and various commercial activities. It operates primarily in the defense and homeland security arenas.

About DigitalGlobe

DigitalGlobe, Inc. is a provider of Earth imagery, data and analysis. The Company’s imagery solutions and other services support a range of uses, including mission-planning, mapping and analysis, environmental monitoring, oil and gas exploration and infrastructure management. The Company’s imagery solutions and other services are sourced from its own satellite constellation and third-party providers. The Company sells its products and services through a combination of direct and indirect channels, consisting of a global network of resellers, strategic partners and direct enterprise sales to its United States Government and Diversified Commercial customer groups. The Company offers products consisting of imagery from its constellation of satellites, and provides geospatial products and services. The Company processes its imagery to varying levels according to its customers’ specifications and delivers its products using the distribution method.

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