BA's Price Drops Agin -- What Our Analysts Think

Shares of Boeing (BA) slid -1.84 % during today's afternoon session, which brings their 52 week performance to 18.95%. The Market Inference outlook on this stock is that it is overvalued at today's price of $211.14. B

The Boeing Company is an American multinational corporation that designs, manufactures, and sells airplanes, rotorcraft, rockets, satellites, telecommunications equipment, and missiles worldwide. The large-cap Industrials company is based in Arlington, United States.

BA Has a Higher P/E Ratio Than the Sector Average

Compared to the Industrials sector's average of 20.49, Boeing has a trailing twelve month price to earnings (P/E) ratio of -23.83 and an expected P/E ratio of 38.18. The P/E ratios are calculated by dividing the company's share price by its trailing 12 month of $-8.86 or forward earnings per share of $5.53.

Earnings represent the net profits left over after subtracting costs of goods sold, taxes, and operating costs from the company's recorded sales revenue. One way of looking at the P/E ratio is that it represents how much investors are willing to pay for every dollar's worth of the company's earnings. Since Boeing's P/E ratio is higher than its sector average of 20.49, we can deduce that the market is overvaluing the company's earnings.

Boeing Is Overvalued in Terms of Expected Growth

Boeing's PEG ratio is 6.53. This metric represents the company's earnings per share divided by its expected growth ratio, and is a useful complement to the price to earnings analysis, because it factors in growth to the valuation. A PEG ratio around or below 1 implies that the market in fairly valuing the company in terms of its growth estimates. But when the PEG ratio is higher, as in Boeing's case, it tells us the company is overvalued.

BA's Weak Cash Flow Generation Is Troubling

The table below shows that Boeing is not generating enough cash. A well run company will generally have cash flows that reflect the strength of its underlying business, and in Boeing's case, free cash flow is growing at an average rate of -50.02% with a coefficient of variability of 476%. We can also see that cash flows from operations are evolving at a -96.87% rate, versus -4.83%:

Date Reported Cash Flow from Operations (k) Capital Expenditures (k) Free Cash Flow (k) YoY Growth
2022-12-31 $3,512,000 $1,222,000 $2,290,000 152.09%
2021-12-31 -$3,416,000 $980,000 -$4,396,000 77.7%
2020-12-31 -$18,410,000 $1,303,000 -$19,713,000 -347.31%
2019-12-31 -$2,446,000 $1,961,000 -$4,407,000 -132.57%
2018-12-31 $15,322,000 $1,791,000 $13,531,000 n/a

Boeing Is Not a Profitable Business

If you are looking to make BA a long term investment, its weak margins may give you cause for concern. As you can see from the below, the company is generally losing money on each sale it makes. That being said, stock prices in the short term can be independent of a company's margins, and Boeing's management may be able to make the business profitable in the future.

Boeing's Gross Margins

Date Reported Revenue (k) Cost of Revenue (k) Gross Margin YoY Growth
2022-12-31 $66,608,000 $63,106,000 5.26% 8.68%
2021-12-31 $62,286,000 $59,269,000 4.84% 149.49%
2020-12-31 $58,158,000 $63,843,000 -9.78% -267.75%
2019-12-31 $76,559,000 $72,093,000 5.83% -69.98%
2018-12-31 $101,127,000 $81,490,000 19.42% n/a

Boeing's Operating Margins

Date Reported Revenue (k) Operating Expenses (k) Operating Margin YoY Growth
2022-12-31 $66,608,000 $7,384,000 -5.33% -14.38%
2021-12-31 $62,286,000 $6,535,000 -4.66% 78.77%
2020-12-31 $58,158,000 $8,132,000 -21.95% -750.78%
2019-12-31 $76,559,000 $7,211,000 -2.58% -121.77%
2018-12-31 $101,127,000 $8,126,000 11.85% n/a

Boeing's cost of revenue is growing at a rate of -5% in contrast to -1.03% for operating expenses. Sales revenues, on the other hand, have experienced a -6.86% growth rate. As a result, the average gross margins growth is -35.91 and the average operating margins growth rate is -161.63, with coefficients of variability of 202% and 265% respectively.

We See Mixed Market Signals Regarding BA

Boeing has an average rating of buy and target prices ranging from $261.0 to $163.1. At its current price of $211.14, the company is trading -7.15% away from its target price of $227.4. 1% of the company's shares are linked to short positions, and 59% of the shares are owned by institutional investors.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.