The Boeing Company
The Boeing Company was founded in 1916, by William E. Boeing as an aircraft manufacturing plant in the US. At its onset, it had a meager 28 employees whose operating expenses were approximately $700 per week. During this early period spanning approximately 30 years, the company was involved in massive mergers and acquisition in a bid to increase its infrastructure, employee skills, and to alleviate competition from emerging companies. Therefore, following this successful business strategy, the company has grown and diversified its operations to become the second largest global aircraft manufacturer and the second largest aerospace and defense contractor going by revenue accumulation and sales volumes. It has an employee base of approximately 170,000 and is a stock component of the Dow Jones Industrial Average.
The company’s operations are divided into five main sections: the Boeing defense, space, and security (BDS), Boeing Capital, Boeing Shared Services group, Engineering, Operations and technology, and the Boeing Commercial Airplanes (BCA). Based on its 2013 annual sales figures, it is currently 30th in the ‘Fortune 500 list’ and 95th in the ‘Fortune Global 500’ list. Its aircraft manufacturing division is responsible for at least 40% of its total revenues generated and its planes are considered as being a part of 75% of the global airline companies, and operate aircrafts in 150 countries globally. Its main competitor is the airbus located in Europe, which is considered as the largest aircraft manufacturer owing to its sales and revenue volumes. In the defense and space division, the company’s main competitors are Lockheed, Gen dynamics, Raytheon, and Rockwell.
The company has continually upgraded and reformed its financial portfolio to suit its growth and development plans. For instance, between 2011 and 2013, the company has reduced the number of its employees by 2000 in a bid to reduce its operating expenses, with the current annual revenue per employee estimated at $514,388. Between 2009 and 2013, the company has also increased its asset valuation from $62.053 billion to its current $92.663 billion. During this same period, its debt has reduced from $12.924 billion to 9.635 billion. The current ratio is used to measure a company’s abilities to pay its debt within the current fiscal year, though investors prefer a low current since it shows ability to grow its portfolio using its current assets. Currently, the company’s current ratio is approximately 1.26, which shows a positive outlook for the company.
In 2013, the company’s net revenues were approximately $86.623 billion, which represented a 5.81% increase from the previous fiscal year. The net profit for this same period increased from $3.9 billion in 2012 to $4.585 billion, with the net profit margin increasing from 4.8% in 2012 to 5.3% in 2013. The operating cash flow is derived from the company’s earnings from sale of products or services. It is generated from a company’s income taxes from earnings before taxes and depreciation (EBITDA), and is used by an investor to check on the value company’s earnings. Currently, Boeing is considered to have an operating cash flow of approximately $8.18 billion, which is a partial figure that financial analysts have used to predict that Boeing has a meager 14% chance of experiencing financial distress in the ensuing two years.
At the NASDAQ, the company’s stock is priced at $121.89, and has had a 52-week high of $144.571 and a 52-week low of $83.52, which represents an 83% lower value than its current value. The company’s average stock daily volumes traded is approximately 4,942,159 compared with a total volume of 6,065,600. The earnings per share (EPS) are the portion of the company’s stock that is apportioned to every share of common stock. Currently, Boeing’s earning per share is estimated at 5.96, which is at or near that of its competitors in both the aircraft manufacturing and defense and aerospace industries. Investors to determine the company’s profitability, especially when compared with its competitors usually use EPS. The price to earnings is another key feature used by investors to determine a company’s earnings and profitability. For instance, a lower PE denotes lower earnings and lower profitability for a company. Boeing’s price to earnings is estimated at 21.57, which is currently higher than those of its major competitors, such as Lockheed (18.23) and General Dynamics (16.73).
According to the company’s dividends growth rate, there has been an incessant increase in the dividends payable to shareholders over the past fiscal years. Data indicates that the dividend payable to shareholders has increased from $1.233 billion in 2009 to $1.642 billion as of December 2013. This increase is representative of the company’s rise in profit margins and reduction in the debt ratio. Another measure of a company’s profit and growth sustainability is the use of the retained earnings. These retained earnings are the portion of the income generated by a company that is left after deductions of taxes, dividends payout, and distribution to the company owners. This amount is used by investors to ascertain a company’s suitability to maintain its growth forecasts through profit retention, rather than liability acquisition. In 2013, Boeing’s retention earnings were estimated at $32.96 billion. The high value of Boeing’s retained earnings is in line with industrial averages that have to retain their income to sustain various investments in the manufacturing sector.
The book value per share is another measure used by investors to ascertain if a stock has been overvalued or undervalued. It is useful for the investor to liquidate his shares safely based on the book value per share since it can act as a price determinant of the common shares. This value is however devoid of such considerations as intangible assets like goodwill, intellectual property, and brands. If the book value per share is currently higher than its current traded stock price, then the company can be considered as been undervalued. Boeing’s book value per share is labeled at 19.90, whose value is considered as being below average when compared to other related companies and their competitors.
In investment circles, firms that have the capability to generate cash flow margins that are more than 5% are considered as sources of income. In the case of Boeing, the company has managed an average cash flow margin of approximately 4%, which is considered as being relatively medium. It is projected that this cash flow margin will be maintained at 3.3% over a five-year term, which shows good ratings for the company. Therefore, based on the data generated from the above analysis, it is plausible to confidently advice clients to hold on to their shares of Boeing since based on current and future projections, the company’s future is bright and its stock will experience a robust growth.