Boeing Company (BA) Quarterly Valuation – May 2014

500px-Boeing-Logo.svgBenjamin 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 5 Highest Dividend Yields Among Undervalued Defensive Companies.  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 specific look at how Boeing Company (BA) fares in the ModernGraham valuation model.

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.

BA Chart

BA data by YCharts

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 or be suitable for a defensive investor: 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

Key Data:

Recent Price $130.81
MG Value $174.12
MG Opinion Fairly Valued
Value Based on 3% Growth $87.67
Value Based on 0% Growth $51.39
Market Implied Growth Rate 6.57%
Net Current Asset Value (NCAV) $16.80
PEmg 21.64
Current Ratio 1.23
PB Ratio 6.58

Balance Sheet – 3/31/2014

Current Assets $64,777,000,000
Current Liabilities $52,502,000,000
Total Debt $7,275,000,000
Total Assets $91,575,000,000
Intangible Assets $8,042,000,000
Total Liabilities $77,055,000,000
Outstanding Shares 730,750,000

Earnings Per Share

2014 (estimate) $7.28
2013 $5.96
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

Earnings Per Share – ModernGraham

2014 (estimate) $6.05
2013 $5.13
2012 $4.51
2011 $4.18
2010 $3.61
2009 $3.24

Dividend History

BA Dividend Chart

BA Dividend data by YCharts


Boeing Company is not suitable for Defensive Investors but is suitable for Enterprising Investors.  The Defensive Investor is concerned with the low current ratio and the high PEmg and PB ratios.  The Enterprising Investor’s only concern is the low current ratio.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and its competitors by exploring the ModernGraham Valuation Index.  As for a valuation, the company appears fairly valued at this time after growing its EPSmg (normalized earnings) from $3.61 in 2010 to an estimated $6.05 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 6.57% and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Boeing Company (BA)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Boeing Company (BA) or in any other company mentioned in the article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from wikipedia; this article is not affiliated with the company in any manner.

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