Valuation: Boeing Company (BA)

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Company Profile (obtained from Google Finance): The Boeing Company (Boeing) is an aerospace company. The Company operates in five segments: Commercial Airplanes, Boeing Military Aircraft (BMA), Network & Space Systems (N&SS), Global Services & Support (GS&S) and Boeing Capital Corporation (BCC). Boeing Defence, Space & Security (BDS) consists of three capabilities-driven businesses: BMA, N&SS and GS&S. Its Other segment includes the unallocated activities of engineering, operations and technology (EO&T) and Shared Services Group (SSG), as well as intercompany guarantees provided to BCC. EO&T provides Boeing with technical and functional capabilities, including information technology, research and development, test and evaluation, technology strategy development, environmental remediation management and intellectual property management. In February 2013, the Company acquired CPU Technology Inc.’s Acalis business.

Defensive and Enterprising Investor Tests (explanation):

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary (explanation):

MG Value $127
MG Opinion Fairly Valued
Value Based on 3% Growth $73
Value Based on 0% Growth $43
Market Implied Growth Rate 8.63%
Net Current Asset Value (NCAV) $19.26
PEmg 25.76
Current Ratio 1.29
PB Ratio 10.91

Key Data:

Balance Sheet – 9/30/2013

Current Assets $64,162,000,000
Current Liabilities $49,680,000,000
Total Debt $8,677,000,000
Total Assets $94,633,000,000
Intangible Assets $8,009,000,000
Total Liabilities $85,682,000,000
Outstanding Shares 751,910,000

 

Earnings Per Share – Diluted

2013 (estimate) $5.68
2012 $5.11
2011 $5.33
2010 $4.46
2009 $1.87
2008 $3.65
2007 $5.26
2006 $2.84
2005 $3.19
2004 $2.24
2003 $0.85
2002 $2.84

Earnings Per Share – Modern Graham

2013 (estimate) $5.04
2012 $4.51
2011 $4.18
2010 $3.61
2009 $3.24
2008 $3.76

Conclusion: 

Boeing may be suitable for the Enterprising Investor following a value investing model, however, at the current time the market price seems to only be fairly valued.  A prudent investor should do more detailed research to determine whether this would be a good investment based on the value investor’s individual portfolio.

What do you think?  Will Boeing achieve the growth rate of around 8.5% that the market implies?

Photo Credit:  Andrew Magill


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