Shares in aerospace company Cobham (LSE: COB) have fallen by around 10% after it reported a loss for the 2015 financial year. Its bottom line swung into the red from a £24m profit in 2014 to a £40m loss in 2015 as a result of goodwill impairment, as well as charges associated with the acquisition and integration of Aeroflex.

On an underlying basis, however, Cobham continues to perform well and it recorded a rise in revenue of 11% as well as an increase in pre-tax profit of 11%. Therefore, the performance of the underlying business remains strong and in the long run this has the potential to deliver improved reported results too. As a sign of the company’s confidence in its long-term potential, it raised dividends by 5% for the full year, which puts Cobham on a very appealing yield of 5.1% following today’s share price fall.

With Cobham trading on a price-to-earnings (P/E) ratio of just 11.9 (using underlying figures) and being expected to grow its bottom line in each of the next two years, it seems to be a good value option within the aerospace industry. Certainly, it’s facing restructuring challenges, but its order intake remains healthy and it could prove to be an excellent long-term performer.

Long-term potential

Similarly, sector peer Meggitt (LSE: MGGT) also offers upbeat long-term prospects. It trades on a P/E ratio of just 12.6 and also offers growth potential over the medium term. For example, Meggitt’s bottom line is expected to rise by 4% this year and by a further 8% next year. This puts it on a price-to-earnings growth (PEG) ratio of just 1.6, which indicates that it offers growth at a very reasonable price.

In addition, Meggitt remains a very sound income play. Although its earnings aren’t as defensive as a number of its FTSE 350 peers that sit in other sectors (such as utilities), Meggitt has impressive dividend growth prospects. Evidence of this can be seen in its dividend coverage ratio which currently stands at a very healthy 2.1. This shows that Meggitt could increase dividend payments at a rapid rate and when combined with a yield of 3.7%, this makes it a top notch income stock.

Benefitting from US growth

Meanwhile, sector peer BAE (LSE: BA) also offers major upside potential over the long run. Like many of its industry peers, it’s set to benefit from the improved outlook for the US economy, with it accounting for the majority of global defence spend. Therefore, with the US economy delivering impressive GDP growth, the chances of defence cutbacks are receding and this could mean higher order volumes for BAE.

Like Meggitt and Cobham, BAE trades on a very enticing valuation. It currently has a P/E ratio of just 12.9, which indicates that there’s upward rerating potential – especially with investor sentiment being strong following BAE’s 12% share price rise in the last six months. With its shares yielding 4.3%, they remain worthy of inclusion in an income portfolio too.

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Peter Stephens owns shares of BAE Systems and Meggitt. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.