EC Boeing Is A Strong Buy

A) Introduction

With a growing backlog of orders and a stellar last quarter earnings release, Boeing Co. (NYSE:BA) is primed to outperform the market in 2015. Yet, on Tuesday, February 25th, Goldman Sachs downgraded it to a "sell" from a "hold" and lowered their price target from $146 to $132. This has resulted in Boeing falling from a high of $158 to a close of just under $151 on Friday. In our opinion, this dip in price offers an attractive entry point for the long-term investor. We don't believe the Goldman Sachs downgrade was warranted, and instead believe in the opinions of Sterne Agee and Stifel, both of whom have recently raised price targets on the stock.

While Boeing faces currency headwinds given its status as the biggest exporter in the US, the stock's combination of value, growth, and industry tailwinds sets it up for another big year in 2015. This report will start with a quantitative breakdown of Boeing's relative valuation, focusing on traditional measures of value that have been academically shown to have predictive ability. Next, we'll analyze Boeing's growth profile and analyze how the company has historically performed, relative to analyst expectations. Lastly, we'll conclude with a qualitative discussion of business risks and growth catalysts, before ending with our conclusions.

B) Valuation Breakdown

We take a quantitative approach to investing, preferring to focus our analysis on metrics that have strong predictive ability. Thus, we tend to analyze academic papers and perform historical back tests on different metrics before including them in our analysis. We will provide links to the academic papers we draw inspiration from as we progress through our breakdown of the stock, so investors can see for themselves what we base our conclusions on. We'll start by analyzing Boeing's value profile. This is important to look at, as Nobel laureate Eugene Fame found that,

Value stocks have higher average returns than growth stocks.

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Disclosure: The author has no positions in any stocks mentioned, but may initiate a long position in BA over the next 72 hours. The author wrote this article themselves, and it expresses their ...

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