As of October 3, 2023, Boeing Co (BA, Financial) saw a slight gain of 1.71%, although it experienced a 3-month loss of 8.82%. The company reported a Loss Per Share of 7.49, raising questions about its valuation. Is the stock really modestly undervalued? This article aims to provide a comprehensive analysis of Boeing Co's intrinsic value to answer this question. Let's delve into the details.
A Brief Overview of Boeing Co
Boeing Co, a major player in the aerospace and defense industry, operates across four segments: commercial airplanes, defense, space and security, global services, and Boeing capital. Competing with giants like Airbus and Lockheed, Boeing Co has a diverse portfolio ranging from aircraft production to military weaponry. Despite the company's broad operations and strong market presence, its current stock price raises questions about its valuation.
Understanding the GF Value
The GF Value is a proprietary measure that estimates a stock's fair value based on historical multiples, an internal adjustment factor, and future business performance estimates. The GF Value Line, displayed on our summary page, represents the ideal trading value of the stock. Stocks that trade significantly above the GF Value Line are considered overvalued, while those trading below are seen as undervalued.
According to our analysis, Boeing Co (BA, Financial) appears to be modestly undervalued. This is based on its current stock price of $191.04 per share and the GF Value estimate. However, this undervaluation could potentially lead to higher long-term returns than its business growth.
Boeing Co's Financial Strength
Investing in companies with poor financial strength can lead to a high risk of permanent capital loss. To avoid this, it's crucial to review a company's financial strength before purchasing its shares. The cash-to-debt ratio and interest coverage are excellent indicators of this strength. With a cash-to-debt ratio of 0.26, Boeing Co ranks lower than 68.71% of the companies in the Aerospace & Defense industry, indicating poor financial strength.
Profitability and Growth of Boeing Co
Investing in profitable companies, especially those with consistent profitability and high profit margins, is generally less risky. Boeing Co has been profitable for six out of the past ten years. However, with an operating margin of -4.63%, it ranks lower than 74.92% of the companies in its industry, indicating fair profitability.
Another critical factor in company valuation is growth. Companies that grow faster create more value for shareholders. However, Boeing Co's average annual revenue growth is -6.1%, ranking it lower than 73.58% of the companies in the Aerospace & Defense industry. Its 3-year average EBITDA growth is 0%, which is lower than most companies in the industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) with its weighted average cost of capital (WACC) is another way to assess its profitability. For the past 12 months, Boeing Co's ROIC has been -3.54, while its cost of capital has been 10.75.
Conclusion
In conclusion, Boeing Co (BA, Financial) appears to be modestly undervalued. However, its financial condition is poor, and its profitability is fair, making it a potentially risky investment. For more details about Boeing Co's financials, check out its 30-Year Financials here.
To discover high-quality companies that may deliver above-average returns, visit our GuruFocus High Quality Low Capex Screener.
