Is Boeing's Stock Overvalued Or Undervalued?

Boeing Co BA shares have lagged the S&P 500 in, gaining just 8.4% year-to-date.

Boeing’s stock has had a wild ride in recent years, but investors may be wondering whether there’s any value in Boeing shares.

Earnings: A price-to-earnings ratio (PE) is one of the most basic fundamental metrics for gauging a stock’s value. The lower the PE, the higher the value.

For comparison, the S&P 500’s PE is currently at about 29.4, nearly double its long-term average of 15.9. Boeing doesn’t currently have a PE ratio because the company is not profitable. In the most recent quarter, Boeing reported a $109 million net loss.

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Growth: Looking ahead to the next four quarters, the S&P 500’s forward PE ratio looks much more reasonable at just 21.4. Boeing's forward earnings multiple of 54 is more than double the S&P 500’s, making Boeing's stock look overvalued.

Boeing’s forward PE ratio is also more than double its industrial sector peers, which are averaging a 21.1 forward earnings multiple.

Yet when it comes to evaluating a stock, earnings aren't everything.

The growth rate is also critical for companies that are rapidly building their bottom lines. The price-to-earnings-to-growth ratio (PEG) is a good way to incorporate growth rates into the evaluation process. The S&P 500’s overall PEG is about 1.0. Once again, without positive earnings, Boeing doesn’t have a positive PEG ratio to use as a valuation gauge.

Price-to-sales ratio is another important valuation metric, particularly for unprofitable companies and growth stocks. The S&P 500’s PS ratio is 3.2, well above its long-term average of 1.63. Boeing’s PS ratio is 2.04, slightly above the S&P 500 average. Boeing's PS ratio is also up 110.3% over the past five years, suggesting the stock is priced at the high end of its historical valuation range.

Finally, Wall Street analysts see some value in Boeing stock over the next 12 months. The average analyst price target among the 21 analysts covering Boeing is $267, suggesting about 14.4% upside from current levels.

The Verdict: At today's price, Boeing stock appears to be overvalued based on a sampling of common fundamental valuation metrics.

Photo: Steve Lynes via Wikimedia.