Engineering group Mincon (LSE: MCON) has today released an upbeat set of first half results that show it’s performing well in a tough operating environment. The results also provide clues to its future performance and whether it’s a better buy than industrial peers BAE Systems (LSE: BA) and Rolls-Royce (LSE: RR).

Mincon’s sales increased by 11% versus the same period of the prior year, while its pre-tax profit rose by the same amount. Given the cyclically depressed volumes and margins in some of the sectors in which it operates, these are strong results.

Africa woes

In fact, Mincon has seen growth only in the Americas and Australia, with its operations in Africa retrenching in the first half of the year. Notably, the instability of the South African rand has caused significant caution and margin pressure on the South African market. This has further impacted neighbouring countries and it would be unsurprising for this trend to continue over the near term.

Looking ahead, Mincon is forecast to record a rise in its bottom line of just 1% next year. Given that the company trades on a price-to-earnings (P/E) ratio of 18.7, it seems to be overvalued. That’s especially the case since the near-term prospects in a number of key markets are highly uncertain.

As a result, investing in BAE or Rolls-Royce could be a better option. For example, BAE trades on a P/E ratio of 13.6 and is expected to grow its bottom line by 8% next year. This is largely due to an improved outlook for the wider defence industry, with austerity across the developed world being replaced with a more growth-orientated spending policy. This means that defence spending is likely to rise, which would be hugely beneficial for BAE.

On the up

This would also benefit Rolls-Royce, which is due to report a rise in earnings of 34% next year. It offers significant bid potential since its shares have fallen by 30% over the last three years. Weaker sterling also makes Rolls-Royce more attractive to foreign buyers, while its current turnaround strategy is sound and should positively catalyse its profitability.

Rolls-Royce may have a sky-high P/E ratio of 31, but when combined with its growth rate it equates to a price-to-earnings growth (PEG) ratio of 0.9. This indicates that it offers better value for money than BAE, which has a PEG ratio of 1.7. However, this figure doesn’t take into account the two companies’ risk profiles.

In Rolls-Royce’s case it has significant risk due to it being in the midst of a major turnaround. While this may succeed, BAE is a much more stable business that has been relatively consistent in recent years. Therefore, on a risk/reward basis, BAE offers greater appeal than Rolls-Royce, although the latter is still a much more attractive investment proposition than Mincon due to its higher growth rate and lower valuation.

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Peter Stephens owns shares of BAE Systems. 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.