Boeing Company should be attractive to the Enterprising Investor as the only concern for the investor type is the low current ratio. However, the Defensive Investor should not be so thrilled with the company due to the high PEmg and PB ratios. As a result, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value, while Defensive Investors consider other opportunities.
When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $3.60 in 2010 to an estimated $6.35 for 2014. This is a very strong level of demonstrated growth which is well above the market’s implied estimate for earnings growth of 5.87% over the next 7-10 years. In fact, the historical growth is around 15.26% per year, so the market is expecting a very significant drop in earnings growth. Even after the ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, the model returns an estimate of intrinsic value falling above the current price, indicating the company is undervalued at the present time.
Be sure to check out previous ModernGraham valuations of Boeing Company for better perspective!
Disclaimer: The author did not hold a position in Boeing Company (BA) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours. Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.