Aircraft Manufacturing Stocks

Boeing Company Valuation – November 2015 Update $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 Most Undervalued Companies for the Defensive Investor – November 2015.  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, together with its subsidiaries, is an aerospace company. The Company operates through five segments: Commercial Airplanes, Boeing Military Aircraft (BMA), Network & Space Systems (N&SS), Global Services & Support (GS&S) and Boeing Capital (BCC). The Defense, Space & Security (BDS) business includes BMA, N&SS and GS&S. The Commercial Airplanes segment develops, produces and markets commercial jet aircraft and provides related support services. The BMA segment is engaged in the research, development, production and modification of manned and unmanned military aircraft and weapons systems for global strike. The N&SS segment is engaged in the research, development, production and modification of the products and related services. The GS&S segment provides a range of support solutions. The BCC segment’s portfolio consists of equipment under operating leases, finance leases, notes and other receivables, assets held for sale or re-lease and investments.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of BA – November 2015

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 $100,466,801,422 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.17 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 80.17% Pass
6. Moderate PEmg Ratio PEmg < 20 21.77 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 15.19 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 1.17 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.86 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 November 2015

EPSmg $6.84
MG Growth Estimate 9.56%
MG Value $188.84
Opinion Fairly Valued
MG Value based on 3% Growth $99.14
MG Value based on 0% Growth $58.12
Market Implied Growth Rate 6.64%
Current Price $148.86
% of Intrinsic Value 78.83%

Boeing Company qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio as well as the high PEmg and PB ratios.  The Enterprising Investor is only initially concerned by the low current ratio.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $4.18 in 2011 to an estimated $6.84 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 6.64% 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 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.

Stage 3: Information for Further Research

BA Charts November 2015

Net Current Asset Value (NCAV) -$35.89
Graham Number $42.32
PEmg 21.77
Current Ratio 1.17
PB Ratio 15.19
Dividend Yield 2.32%
Number of Consecutive Years of Dividend Growth 4

 

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Most Recent Balance Sheet Figures

Balance Sheet Information Sep15
Total Current Assets $67,576,000,000
Total Current Liabilities $57,808,000,000
Long-Term Debt $8,402,000,000
Total Assets $98,998,000,000
Intangible Assets $7,828,000,000
Total Liabilities $92,258,000,000
Shares Outstanding (Diluted Average) 687,800,000

Earnings Per Share History

Next Fiscal Year Estimate $7.92
Dec14 $7.38
Dec13 $5.96
Dec12 $5.11
Dec11 $5.34
Dec10 $4.45
Dec09 $1.84
Dec08 $3.67
Dec07 $5.28
Dec06 $2.85
Dec05 $3.20
Dec04 $2.30
Dec03 $0.89
Dec02 $0.61
Dec01 $3.41
Dec00 $2.44
Dec99 $2.49
Dec98 $1.15
Dec97 -$0.18
Dec96 $1.85
Dec95 $0.58

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $6.84
Dec14 $6.08
Dec13 $5.13
Dec12 $4.51
Dec11 $4.18
Dec10 $3.60
Dec09 $3.24
Dec08 $3.78
Dec07 $3.53
Dec06 $2.42
Dec05 $2.17
Dec04 $1.74
Dec03 $1.63
Dec02 $2.01
Dec01 $2.43
Dec00 $1.81
Dec99 $1.39

Recommended Reading:

Other ModernGraham posts about the company

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
30 Companies in the Spotlight This Week – 5/23/15
Boeing Company Quarterly Valuation – May 2015 $BA

Other ModernGraham posts about related companies

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
Boeing Company Quarterly Valuation – August 2014 $BA
Boeing Company (BA) Quarterly Valuation – May 2014

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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