Yahoo Finance The Boeing Company (NYSE:BA) Looks Undervalued After an Earnings Surprise
This article first appeared on Simply Wall St News.
Boeing(NYSE:BA) finally looks to be past the major turbulences. The aerospace giant announced a profitable quarter after nearly 2 years, surprising the analysts.
Can this be enough to finally push the stock after it has been stuck in a multi-month range? As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook are already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at Boeing’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Check out our latest analysis for Boeing
Latest Developments
Unsurprisingly, the stock ended up being one of the biggest winners of the day, ending the session 4.2% higher. The company turned US$755m in profit in the second quarter, compared with US$3.3b loss for the same period.
The first half of the year brought 243 net orders, mainly from United Airlines with 200 737MAX orders. While the 737 MAX crisis looks behind us, the craft is still grounded at some markets, most notably in China. Additionally, new problems, this time related to 787 Dreamliner are starting to emerge, threatening another series of delays and expensive maintenance.
The president and CEO Dave Calhoun acknowledged success and stated that he expects a full recovery in 2023. He also backtracked on his old comment about cutting jobs, saying that jobs will remain due to demand increases.
Is Boeing still cheap?
Our valuation model shows that the intrinsic value for the stock is $321.48, which is above what the market is valuing the company at the moment.
This indicates a potential opportunity to buy low. Interestingly, Boeing's share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator of how much the stock moves relative to the rest of the market. Boeing's monthly Beta is currently at 1.63, meaning that the stock moves 63% more than the market on average.
What does the future of Boeing look like?
Future outlook is an essential aspect of buying a stock, especially if you are looking for growth in your portfolio. Although value investors would argue that it's the intrinsic value relative to the price that matters the most, a more compelling investment thesis would be high growth potential at a cheap price. In Boeing's case, its revenues over the next few years are expected to grow by 64%, indicating a highly optimistic future ahead. If an expense does not increase by the same rate or higher, this top-line growth should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? Since BA is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you've been keeping an eye on BA for a while, now might be the time to enter the stock. Its buoyant future outlook isn't fully reflected in the current share price yet, which means it's not too late to buy BA. But before you make any investment decisions, consider other factors such as the track record of its management team to make a well-informed buy.
So while earnings quality is essential, it's equally important to consider the risks facing Boeing at this point. For example, Boeing has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
If you are no longer interested in Boeing, you can use our free platform to see our list of over 50 other stocks with high growth potential.
Simply Wall St analyst Stjepan Kalinic and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
