Critical Analysis: DigitalGlobe (DGI) & Northrop Grumman Corporation (NOC)

DigitalGlobe (NYSE: DGI) and Northrop Grumman Corporation (NYSE:NOC) are both mid-cap computer and technology companies, but which is the better investment? We will contrast the two companies based on the strength of their dividends, institutional ownership, earnings, valuation, profitability, analyst recommendations and risk.

Dividends

Northrop Grumman Corporation pays an annual dividend of $4.00 per share and has a dividend yield of 1.5%. DigitalGlobe does not pay a dividend. Northrop Grumman Corporation pays out 30.6% of its earnings in the form of a dividend. Northrop Grumman Corporation has raised its dividend for 9 consecutive years.

Institutional and Insider Ownership

96.3% of DigitalGlobe shares are owned by institutional investors. Comparatively, 81.5% of Northrop Grumman Corporation shares are owned by institutional investors. 2.3% of DigitalGlobe shares are owned by company insiders. Comparatively, 0.7% of Northrop Grumman Corporation shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for DigitalGlobe and Northrop Grumman Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
DigitalGlobe 0 4 1 0 2.20
Northrop Grumman Corporation 0 6 7 1 2.64

DigitalGlobe presently has a consensus target price of $33.90, suggesting a potential downside of 2.87%. Northrop Grumman Corporation has a consensus target price of $268.34, suggesting a potential downside of 0.36%. Given Northrop Grumman Corporation’s stronger consensus rating and higher possible upside, analysts plainly believe Northrop Grumman Corporation is more favorable than DigitalGlobe.

Profitability

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

Net Margins Return on Equity Return on Assets
DigitalGlobe 0.64% 2.40% 0.97%
Northrop Grumman Corporation 9.20% 39.22% 8.74%

Risk & Volatility

DigitalGlobe has a beta of 1.01, suggesting that its stock price is 1% more volatile than the S&P 500. Comparatively, Northrop Grumman Corporation has a beta of 0.66, suggesting that its stock price is 34% less volatile than the S&P 500.

Earnings & Valuation

This table compares DigitalGlobe and Northrop Grumman Corporation’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
DigitalGlobe $809.90 million 2.68 $402.60 million $0.02 1,745.87
Northrop Grumman Corporation $25.19 billion 1.86 $3.80 billion $13.09 20.57

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

Summary

Northrop Grumman Corporation beats DigitalGlobe on 12 of the 18 factors compared between the two stocks.

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.

About Northrop Grumman Corporation

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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