Head-To-Head Contrast: Mercury Systems (MRCY) vs. Northrop Grumman (NOC)

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

Institutional and Insider Ownership

96.3% of Mercury Systems shares are owned by institutional investors. Comparatively, 81.1% of Northrop Grumman shares are owned by institutional investors. 3.5% of Mercury Systems shares are owned by insiders. Comparatively, 0.7% of Northrop Grumman shares are owned by 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.

Valuation and Earnings

This table compares Mercury Systems and Northrop Grumman’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Mercury Systems $408.59 million 6.08 $24.87 million $0.86 59.84
Northrop Grumman $24.51 billion 2.24 $2.20 billion $13.42 23.48

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.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Mercury Systems and Northrop Grumman, as provided by MarketBeat.

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

Mercury Systems presently has a consensus price target of $52.20, suggesting a potential upside of 1.44%. Northrop Grumman has a consensus price target of $302.54, suggesting a potential downside of 4.00%. Given Mercury Systems’ stronger consensus rating and higher probable upside, research analysts clearly believe Mercury Systems is more favorable than Northrop Grumman.

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. Mercury Systems has raised its dividend for 10 consecutive years.

Profitability

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

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

Risk and Volatility

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

Summary

Northrop Grumman beats Mercury Systems on 9 of the 17 factors compared between the two stocks.

Mercury Systems Company Profile

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.

Northrop Grumman Company Profile

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.

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