Analyzing Cubic Corporation (NYSE:CUB) & L-3 Communications Holdings (LLL)

Cubic Corporation (NYSE: CUB) and L-3 Communications Holdings (NYSE:LLL) are both computer and technology companies, but which is the better business? We will compare the two businesses based on the strength of their dividends, earnings, analyst recommendations, institutional ownership, valuation, risk and profitabiliy.

Dividends

Cubic Corporation pays an annual dividend of $0.27 per share and has a dividend yield of 0.6%. L-3 Communications Holdings pays an annual dividend of $3.00 per share and has a dividend yield of 1.7%. Cubic Corporation pays out -128.6% of its earnings in the form of a dividend. L-3 Communications Holdings pays out 33.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. L-3 Communications Holdings has raised its dividend for 13 consecutive years. L-3 Communications Holdings is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider and Institutional Ownership

89.4% of Cubic Corporation shares are held by institutional investors. Comparatively, 81.9% of L-3 Communications Holdings shares are held by institutional investors. 7.9% of Cubic Corporation shares are held by company insiders. Comparatively, 2.9% of L-3 Communications Holdings shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Cubic Corporation	-0.37%	-0.78%	-0.36%
L-3 Communications Holdings	6.44%	14.15%	5.60%

Volatility and Risk

Cubic Corporation has a beta of 0.98, suggesting that its share price is 2% less volatile than the S&P 500. Comparatively, L-3 Communications Holdings has a beta of 1.14, suggesting that its share price is 14% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Cubic Corporation and L-3 Communications Holdings, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Cubic Corporation	0	0	3	0	3.00
L-3 Communications Holdings	0	8	5	0	2.38

Cubic Corporation currently has a consensus price target of $52.67, indicating a potential upside of 11.23%. L-3 Communications Holdings has a consensus price target of $178.40, indicating a potential upside of 1.15%. Given Cubic Corporation’s stronger consensus rating and higher possible upside, analysts clearly believe Cubic Corporation is more favorable than L-3 Communications Holdings.

Earnings and Valuation

This table compares Cubic Corporation and L-3 Communications Holdings’ gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	EBITDA	Earnings Per Share	Price/Earnings Ratio
Cubic Corporation	$1.46 billion	0.88	$73.37 million	($0.21)	-225.48
L-3 Communications Holdings	$10.83 billion	1.27	$1.25 billion	$8.87	19.88

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

Summary

L-3 Communications Holdings beats Cubic Corporation on 11 of the 16 factors compared between the two stocks.

About Cubic Corporation

Cubic Corporation (Cubic) designs, integrates and operates systems, products and services that provide situational awareness for its customers in the transportation and defense industries. The Company operates in three business segments across the global transportation and defense markets, which include Cubic Transportation Systems (CTS), Cubic Global Defense (CGD) and Cubic Global Defense Services (CGD Services). The Company’s CTS segment is a systems integrator of payment and information technology and services for travel solutions. The Company’s CGD Systems is focused on two primary lines of business: training systems and secure communications (SC) products. The Company’s CGD Services segment is a provider of training, operations, intelligence, maintenance, technical and other support services to the United States government and its agencies and allied nations. It also provides cross-domain hardware solutions to address multi-level security challenges across common networks.

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.