ModernGraham Quarterly Valuation Of Boeing Company

Feb.18.14 | About: The Boeing (BA)

Boeing (NYSE:BA) is a large company that many investors will choose to include in their portfolios solely because they want exposure to the airplane manufacturing sector; however, Intelligent Investors know to make sure to do thorough fundamental analysis of any investment opportunity in order to make sure it can be purchased for less than the intrinsic value. 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. 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 fares in the ModernGraham valuation model.

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:

MG Value $133.72
MG Opinion Fairly Valued
Value Based on 3% Growth $74.45
Value Based on 0% Growth $43.64
Market Implied Growth Rate 8.42%
Net Current Asset Value (NCAV) $18.18
PEmg 25.35
Current Ratio 1.26
PB Ratio 6.54
Click to enlarge

Balance Sheet - 12/31/2013

Current Assets $65,074,000,000
Current Liabilities $51,486,000,000
Total Debt $8,072,000,000
Total Assets $92,663,000,000
Intangible Assets $8,095,000,000
Total Liabilities $77,788,000,000
Outstanding Shares 747,380,000
Click to enlarge

Earnings Per Share

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
2003 $0.85
2002 $2.84
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Earnings Per Share - ModernGraham

2013 $5.13
2012 $4.51
2011 $4.18
2010 $3.61
2009 $3.24
2008 $3.76
Click to enlarge

Dividend History

BA Dividend Chart

BA Dividend data by YCharts


Boeing Company passes the requirements of the Enterprising Investor, but not the Defensive Investor. The company's current ratio is too low, and it is trading at too high PEmg and PB ratios for the Defensive Investor. The Enterprising Investor also does not like the current ratio, but the long-term debt level is low enough that the Enterprising Investor is willing to overlook the low current ratio. As a result, this investor type should feel comfortable proceeding with further research into the company and other opportunities, beginning with a review of ModernGraham's valuation of Lockheed Martin (NYSE:LMT) and ModernGraham's valuation of Honeywell International (NYSE:HON). From strictly a valuation standpoint, the company appears to be trading at a fair price. The company has grown its EPSmg (normalized earnings) from $3.24 in 2009 to $5.13 for 2013. This level of growth supports the market's implied estimate for growth of 8.42%, and the ModernGraham valuation model returns an estimate of an intrinsic value that is within a margin of safety as the current 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? Where do you see the company going in the future? Is there a company you like better?

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