Contrasting Mercury Systems (MRCY) & L-3 Communications Holdings (LLL)

L-3 Communications Holdings (NYSE: LLL) and Mercury Systems (NASDAQ:MRCY) are both mid-cap aerospace companies, but which is the superior stock? We will compare the two businesses based on the strength of their risk, institutional ownership, earnings, dividends, analyst recommendations, valuation and profitability.

Dividends

L-3 Communications Holdings pays an annual dividend of $3.00 per share and has a dividend yield of 1.7%. Mercury Systems does not pay a dividend. L-3 Communications Holdings pays out 33.8% of its earnings in the form of a dividend. Mercury Systems has raised its dividend for 13 consecutive years.

Profitability

This table compares L-3 Communications Holdings and Mercury Systems’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
L-3 Communications Holdings 6.44% 14.15% 5.60%
Mercury Systems 6.09% 4.87% 3.56%

Analyst Ratings

This is a summary of current ratings and price targets for L-3 Communications Holdings and Mercury Systems, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
L-3 Communications Holdings 0 7 6 1 2.57
Mercury Systems 0 2 6 0 2.75

L-3 Communications Holdings presently has a consensus price target of $182.09, indicating a potential upside of 2.25%. Mercury Systems has a consensus price target of $42.20, indicating a potential downside of 8.08%. Given L-3 Communications Holdings’ higher probable upside, analysts plainly believe L-3 Communications Holdings is more favorable than Mercury Systems.

Insider & Institutional Ownership

82.7% of L-3 Communications Holdings shares are owned by institutional investors. Comparatively, 97.5% of Mercury Systems shares are owned by institutional investors. 2.9% of L-3 Communications Holdings shares are owned by company insiders. Comparatively, 4.3% of Mercury Systems shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Risk & Volatility

L-3 Communications Holdings has a beta of 1.15, suggesting that its stock price is 15% more volatile than the S&P 500. Comparatively, Mercury Systems has a beta of 0.39, suggesting that its stock price is 61% less volatile than the S&P 500.

Earnings and Valuation

This table compares L-3 Communications Holdings and Mercury Systems’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
L-3 Communications Holdings $10.90 billion 1.28 $1.32 billion $8.87 20.08
Mercury Systems $408.59 million 5.39 $73.56 million $0.58 79.16

L-3 Communications Holdings has higher revenue and earnings than Mercury Systems. L-3 Communications Holdings is trading at a lower price-to-earnings ratio than Mercury Systems, indicating that it is currently the more affordable of the two stocks.

Summary

L-3 Communications Holdings beats Mercury Systems on 10 of the 17 factors compared between the two stocks.

About L-3 Communications Holdings

L3 Technologies, Inc., formerly L-3 Communications Holdings, Inc., is a prime contractor in Intelligence, Surveillance and Reconnaissance (ISR) systems, aircraft sustainment, simulation and training, night vision and image intensification equipment and security and detection systems. The Company provides a broad range of communication and electronic systems and products used on military and commercial platforms. It operates through four segments: Electronic Systems, Aerospace Systems, Communication Systems and Sensor Systems. Electronic Systems provides a broad range of products and services for military and commercial customers in several niche markets across several business areas. Aerospace Systems delivers integrated solutions and provides engineering, modernization, upgrade, sustainment, and maintenance and logistics support. Communication Systems delivers products and services for the global communications market. Sensor Systems provides diverse sensor technologies.

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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