Boeing ($BA) is a US-based aerospace and defense company – by most measures the world’s largest. $BA has just emerged from their longest work stoppage in 13 years. This has not stopped some analysts comparing the company to US automotive industry – with their significant current troubles. The company is trading toward the bottom of their 52-week range. So how does the current share price look from an intrinsic value perspective?
Valuecruncher produces a valuation of US$51.29 for $BA. This is a current valuation (an estimate of intrinsic value using a discounted cash flow model) not a target price. This valuation is 10.1% above the current share price of US$46.58.
- Revenue: Reuters aggregates 16 analysts covering $BA and these analysts have mean estimates of 2008 and 2009 revenues of US$68.0 billion and US$72.3 billion respectively. For our analysis we have used US$67.5 billion in 2008, US$72.0 billion in 2009 and US$75.0 billion in 2010.
- Profitability: We have used an EBITDA margin of 7.5% in 2008 rising to 8.0% in 2009. Reuters has $BA‘s EBITD margin at 7.0% last year and averaging 10.5% over the last five-years.
- Capital Expenditure: We have assumed capital expenditures of US$1.75 billion per annum moving forward.
- Discount Rate: 10.0%.
- Terminal Growth Rate: 2.5%.
Our analysis incorporates the cash and debt on the $BA balance sheet – Valuecruncher calculates a net debt number.
Play with our assumptions – what does your analysis say? We don’t think it appears quite as bad as others make out.