Aircraft Manufacturing Stocks

Boeing Company Valuation – June 2016 $BA

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – March 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Boeing Company (BA) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): The Boeing Company is an aerospace firm. The Company operates in five segments: Commercial airplanes; Defense, Space & Security (BDS) business, such as Boeing Military Aircraft (BMA), Network & Space Systems (N&SS) and Global Services & Support (GS&S), and Boeing Capital (BCC). Its Commercial Airplanes segment develops, produces and markets commercial jet aircraft, which provides related support services to the commercial airline industry. Its BMA segment is engaged in the research, development, production and modification of military aircraft and weapons systems. Its N&SS segment is engaged in the research, development, production and modification of the products and related services, such as electronics, strategic missile and defense systems, and information solutions, among others. Its GS&S segment provides services to aircraft and systems. Its BCC’s segment portfolio consists of equipment under operating leases, finance leases, notes and other receivables and assets held for sale.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of BA – June 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $82,307,483,582 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.32 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 113.99% Pass
6. Moderate PEmg Ratio PEmg < 20 17.84 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 21.60 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.32 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.54 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

BA value chart June 2016

EPSmg $7.35
MG Growth Estimate 9.47%
MG Value $201.69
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $106.60
MG Value based on 0% Growth $62.49
Market Implied Growth Rate 4.67%
Current Price $131.14
% of Intrinsic Value 65.02%

Boeing Co is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PB ratio. The Enterprising Investor is only concerned with the low current ratio. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.51 in 2012 to an estimated $7.35 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.67% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

Boeing Co performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

BA charts June 2016

Net Current Asset Value (NCAV) -$32.92
Graham Number $34.29
PEmg 17.84
Current Ratio 1.32
PB Ratio 21.60
Current Dividend $3.82
Dividend Yield 2.91%
Number of Consecutive Years of Dividend Growth 5

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $65,587,000,000
Total Current Liabilities $49,517,000,000
Long-Term Debt $8,721,000,000
Total Assets $91,547,000,000
Intangible Assets $7,726,000,000
Total Liabilities $87,504,000,000
Shares Outstanding (Diluted Average) 665,800,000

Earnings Per Share History

Next Fiscal Year Estimate $8.27
Dec2015 $7.44
Dec2014 $7.38
Dec2013 $5.96
Dec2012 $5.11
Dec2011 $5.34
Dec2010 $4.45
Dec2009 $1.84
Dec2008 $3.67
Dec2007 $5.28
Dec2006 $2.85
Dec2005 $3.20
Dec2004 $2.30
Dec2003 $0.89
Dec2002 $0.61
Dec2001 $3.41
Dec2000 $2.44
Dec1999 $2.49
Dec1998 $1.15
Dec1997 -$0.18
Dec1996 $1.60

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $7.35
Dec2015 $6.68
Dec2014 $6.08
Dec2013 $5.13
Dec2012 $4.51
Dec2011 $4.18
Dec2010 $3.60
Dec2009 $3.24
Dec2008 $3.78
Dec2007 $3.53
Dec2006 $2.42
Dec2005 $2.17
Dec2004 $1.74
Dec2003 $1.63
Dec2002 $2.01
Dec2001 $2.43
Dec2000 $1.79

Recommended Reading:

Other ModernGraham posts about the company

9 Best Stocks For Value Investors This Week – 11/28/15
Boeing Company Valuation – November 2015 Update $BA
15 Best Stocks For Value Investors This Week – 8/22/15
Boeing Company Analysis – August 2015 Update $BA
5 Undervalued Dow Stocks to Research – July 2015

Other ModernGraham posts about related companies

Textron Inc Valuation – December 2015 Update $TXT
Boeing Company Valuation – November 2015 Update $BA
Textron Inc. Analysis – August 2015 Update $TXT
Boeing Company Analysis – August 2015 Update $BA
Textron Inc. Quarterly Valuation – May 2015 $TXT
Boeing Company Quarterly Valuation – May 2015 $BA
Boeing Company Quarterly Valuation – February 2015 $BA
Textron Inc. Quarterly Valuation – February 2015 $TXT
Boeing Company Quarterly Valuation – November 2014 $BA
Textron Inc. Quarterly Valuation – November 2014 $TXT

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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