A Quickie With The Boeing Company

My Disclaimer
I could waste a lot of your time with graphs, charts, and other assorted worthless information all intended to show you that I know something about something when it comes to this company. But the truth is, I know very little about this company. I can tell you that I am not a shareholder and I can also tell you that I am a value investor focusing on picks and shovels type companies.

My intent with this post is to provide you with a brief overview of my various valuations for the company, all based on the company’s most recent 10-K filing, so you can determine if you have any investment interest.

Past and future gains contained in this post are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Valuations, while given as a specific amount, are always with in a valuation range. Investors should always be aware that any investment has the potential for loss, and past performance is no guarantee of future results.

What They Do
The Boeing Company develops, produces and markets commercial jet aircraft, and provides related support services. The company also performs research, development, production, modification and support of products and related systems for the US Department of Defense, NASA, international defense markets, civil markets and commercial satellite markets. Additionally, the company is engaged in the research, development, production and modification of manned and unmanned military aircraft and weapons systems for the US Government. Listed competitors include Northrop Grumman, Lockheed Martin, and Airbus Group N.V.

Short-Term Target
My current short-term target for the stock is $389.43, with an initial trailing stop set at $350.52. Based on a recent price of $355.86, upward price movement will find resistance at $368 and again at $377.70, with final resistance found at $390.11. Downward price movement will find support at $342.76 and again at $337.79, with final support found at $321.69.

Quality of Earnings
A company’s earnings can be impacted by sources unrelated to the company’s day to day operations. These unrelated sources will distort a company’s earnings and consequently its fair value. Investors should always explore the sources of a company’s earnings to better understand potential valuation impacts. Considering the company’s earnings, 0% came from tax benefits while 13% came from sources unrelated to day to day operations.

Momentum Target
My momentum target for the stock is $413. Momentum targets are determined by integrating a company’s most recent annual EPS and year-over-year earnings growth, with the current yield of a 10-year treasury. Momentum investing often requires investors to trade in stocks that have already enjoyed significant gains while making no allowances for overall market corrections or the sustainability of a company’s earnings.

Growth Target
My growth target for the stock is $406. Growth targets are determined using a company’s year-over-year earnings growth, year-over-year PE growth, and year-over-year price growth.

Five Year Growth of $10K
If you had invested $10K in this stock five years ago (12/31/13), you would have received 73.27 shares of stock with a cost basis of $136.49 per share. Had you held the stock for five years and then closed your position (12/31/2018), you would have closed at $322.50 per share. During that holding period you would have collected $351 in dividends, and your initial $10K investment would have returned to you $23,628 a gain of 136%, excluding dividends.

Insider Transactions
The SEC classifies insiders as “management, officers or any beneficial owners with more than 10% class of a company’s security.” Insiders are required to abide by certain rules and fill out SEC forms every time they buy or sell company shares. In addition, to prevent insider trading, or benefiting illegally from material non-public information that their positions give them access to, the law prevents insiders from deposing of shares within six months of their purchase. This effectively bars insiders from profiting from quick trades based on their “insider” knowledge.

Over the past 12 months, the company has recorded 90 insider trades involving 368,596 shares of stock. Of those 90 insider trades, 35 were Buys involving 185,231 shares of stock, and 55 were Sells involving 183,365 shares of stock, creating an insider buy to sell ratio of roughly 1 to 1.

Prior Average Valuations
My average valuation for the prior five year period of FY 2013 through FY 2017 was $62. The stock price during that time period averaged $172, earnings averaged $8.23 per share, and the average PE Ratio was 21. The current PE Ratio is 17.

Cost of Common Equity
The cost of common equity is the minimum annual rate of return an investor should expect to earn when investing in shares of a particular company. I calculate this by adding the thirty-year treasury yield to the beta ratio for the stock multiplied by my default equity risk premium. My cost of common equity for this stock is 6.17%.

Fair Value Investing
Fair value investing, more commonly known as value investing, requires investors to consider a company’s overall financial condition including past and future earnings growth, free cash flow, both book and tangible book values, net current asset value, and many other valuation metrics. My fair value estimate for the stock is $245 and my target prices are derivatives of my fair value estimate.

The Boeing Company (NYSE: BA) – FYE 12/2018 – SELL HALF – The stock is currently trading at levels above my most recent $245 baseline value estimate, but below my most recent $391 terminate target. Please See Linked PDF Worksheet

There you are, short and to the point.

Wax
Posted on 07/07/19