Boeing Co (BA, Financial), a major player in the aerospace and defense industry, has been experiencing some fluctuations in the stock market. The company's stock reported a daily loss of 2.57%, and a 3-month loss of 9.67%. It also recorded a Loss Per Share of 7.49. This performance raises the question: is the stock modestly undervalued? In this article, we will delve into an in-depth valuation analysis of Boeing Co (BA). So, stay with us to uncover the hidden potentials of this aerospace giant.
A Glimpse into Boeing Co (BA, Financial)
Boeing Co operates in four segments: commercial airplanes; defense, space, and security; Global services; and Boeing capital. Competing with Airbus in the production of aircraft and with Lockheed, Northrop, and several others in the creation of military aircraft and weaponry, Boeing Co has established itself as a significant force in the industry. With a stock price of $190.43 and a market cap of $114.90 billion, the company's value is a topic of interest for investors. The GF Value, a proprietary measure of a stock's intrinsic value, for Boeing Co is $234.28.
Deciphering the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. If the stock price is significantly above the GF Value Line, it is considered overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
For Boeing Co (BA, Financial), the GF Value suggests that the stock is modestly undervalued. Consequently, the long-term return of its stock is likely to be higher than its business growth.
Assessing Boeing Co's Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss to investors. To avoid such a loss, it's crucial to evaluate a company's financial strength before purchasing shares. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. With a cash-to-debt ratio of 0.26, Boeing Co ranks worse than 68.38% of 291 companies in the Aerospace & Defense industry. This statistic indicates that the financial strength of Boeing Co is relatively poor.
Boeing Co's Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is generally less risky. Boeing Co has been profitable 6 out of the past 10 years. However, with an operating margin of -4.63%, it ranks worse than 75% of 292 companies in the Aerospace & Defense industry. This statistic suggests fair profitability.
The growth of a company is a vital factor in its valuation. The 3-year average annual revenue growth rate of Boeing Co is -6.1%, ranking worse than 73.38% of 263 companies in the Aerospace & Defense industry. This statistic suggests that the company's growth is relatively poor.
Comparing ROIC and WACC
Comparing a company's return on invested capital (ROIC) and the weighted cost of capital (WACC) provides another perspective on its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. Ideally, the ROIC should be higher than the WACC. However, for Boeing Co, the ROIC is -3.54, and the WACC is 10.81.
Conclusion
In conclusion, the stock of Boeing Co (BA, Financial) appears to be modestly undervalued. The company's financial condition is poor, and its profitability is fair. Its growth ranks worse than 0% of 231 companies in the Aerospace & Defense industry. To learn more about Boeing Co stock, you can check out its 30-Year Financials here.
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