Aircraft Manufacturing Stocks

Boeing Co Valuation – April 2019 #BA

Company Profile (excerpt from Reuters): The Boeing Company, incorporated on July 19, 1934, is an aerospace firm. The Company operates in four segments: Commercial Airplanes (BCA); Defense, Space & Security (BDS); Global Services (BGS), and Boeing Capital (BCC).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BA – April 2019

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 $221,355,979,748 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.08 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 236.24% Pass
6. Moderate PEmg Ratio PEmg < 20 25.79 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 552.21 Fail
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 1.08 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.71 Fail
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

EPSmg $15.20
MG Growth Estimate 15.00%
MG Value $585.33
Opinion Undervalued
MG Grade D+
MG Value based on 3% Growth $220.45
MG Value based on 0% Growth $129.23
Market Implied Growth Rate 8.65%
Current Price $392.11
% of Intrinsic Value 66.99%

Boeing Co does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $6.68 in 2015 to an estimated $15.2 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8.65% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Boeing Co revealed the company was trading above its Graham Number of $15.72. The company pays a dividend of $6.84 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 25.79, which was above the industry average of 24.41. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-50.43.

Boeing Co scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$50.43
Graham Number $15.72
PEmg 25.79
Current Ratio 1.08
PB Ratio 552.21
Current Dividend $6.84
Dividend Yield 1.74%
Number of Consecutive Years of Dividend Growth 7

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $87,830,000,000
Total Current Liabilities $81,590,000,000
Long-Term Debt $10,657,000,000
Total Assets $117,359,000,000
Intangible Assets $11,269,000,000
Total Liabilities $116,949,000,000
Shares Outstanding (Diluted Average) 577,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $18.40
Dec2018 $17.85
Dec2017 $13.85
Dec2016 $7.83
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

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $15.20
Dec2018 $12.69
Dec2017 $9.57
Dec2016 $7.21
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

Recommended Reading:

Other ModernGraham posts about the company

Boeing Co Valuation – November 2018 $BA
Boeing Co. Valuation – February 2018 $BA
5 Undervalued Dow Components to Research – March 2017
5 Undervalued Dow Components to Research – February 2017
5 Undervalued Dow Components to Research – December 2016

Other ModernGraham posts about related companies

Boeing Co. Valuation – February 2018 $BA
AAR Corp Valuation – Initial Coverage $AIR
TransDigm Group Inc Valuation – Initial Coverage $TDG
Textron Inc Valuation – June 2016 $TXT
Boeing Company Valuation – June 2016 $BA
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

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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