Boeing (BA) Stock Could Be 41% Undervalued As MAX 7 Wins Certification
Boeing stock has gained 5.1% over the past week, and investors now face a split verdict on value as the Discounted Cash Flow (DCF) intrinsic value estimate points to sizable upside while market based multiples lean the other way.
- The 5.1% move over the past week suggests sentiment has improved recently, even though longer term returns have been much more muted.
- Fresh certification of the 737 MAX 7 and expectations for higher aircraft production can support future cash flow, but ongoing cost pressures and execution risks around programs such as new facilities and complex defense contracts may weigh on how much of that cash ultimately reaches shareholders.
- Boeing currently passes only 2 of 6 valuation checks, which points to a stock that does not screen as a clear bargain on the broader metrics despite the DCF based upside case.
The issue now is whether Boeing's recent share price strength already reflects the improvement in its intrinsic value estimate or if there is still a meaningful gap for investors to focus on.
Find out why Boeing's 2.1% return over the last year is lagging behind its peers.
Does Boeing Look Undervalued on Cash Flow?
The Discounted Cash Flow (DCF) method estimates what Boeing could be worth based on the cash it is expected to generate for shareholders. Boeing has latest twelve month free cash flow of about $527 million in US$, which the model assumes will grow as aircraft deliveries and services stabilize over time.
On these cash flow projections, the DCF model points to an estimated intrinsic value of about $396 per share. Compared with the current share price, this indicates the stock appears around 41.3% undervalued according to this model. The recent certification of the 737 MAX 7 supports the case that future cash flows can improve as inventory is delivered and production targets are pursued, even though execution risks and cost pressures are still present.
Overall, this DCF analysis indicates that Boeing stock appears undervalued relative to the cash flows implied in this model.
Our Discounted Cash Flow (DCF) analysis suggests Boeing is undervalued by 41.3%. Track this in your watchlist or portfolio, or discover 51 more high quality undervalued stocks.
Does Boeing Look Pricey on Earnings?
The P/E ratio is a common way to judge how much investors are paying today for each dollar of Boeing earnings, which fits a stock where profitability is a central focus. Boeing currently trades on a P/E of about 87.8x. That is more than double the Aerospace & Defense industry average of roughly 39.0x and also well above the peer group average of about 37.5x.
A more tailored fair P/E ratio that factors in Boeing specific characteristics sits closer to 77.9x. The current P/E is still higher than that, which indicates investors are already paying a premium for the recovery story and are accepting a richer price than the company specific model implies.
On this earnings based yardstick, Boeing stock appears overvalued compared with both its industry and its own fair P/E estimate.
See what the numbers say about this price — find out in our valuation breakdown.
The Boeing Narrative: What Would Justify Today's Price?
Simply Wall St Narratives for Boeing take the valuation puzzle a step further by spelling out the specific assumptions on growth, margins and earnings that would need to hold for Boeing's stock to be worth materially more or less than its current price, and they sit on the company’s Community page. Where a single ratio or DCF output gives you one number, these narratives lay out the future that number depends on so you can track whether it still lines up with reality over time.
The Boeing community is split, with one camp focused on the order book and deleveraging potential while the other focuses on execution risk and dilution.
Bull case: 23% undervalued
"Boeing's vast $522 billion commercial backlog, with 5,900 aircraft sold firm into the next decade, positions the company to disproportionately benefit from the expected doubling of global air travel demand by 2040…"
Read the full Bull Case to see why Boeing could be undervalued
Bear case: 45% overvalued
"The recovery is real. Most of it is already in the price…"
Read the full Bear Case to see why Boeing could be overvalued
Do you think there's more to the story for Boeing? Head over to our Community to see what others are saying!
The Bottom Line
The Discounted Cash Flow (DCF) view suggests Boeing could offer material upside based on future cash generation, while the earnings multiples point to an overvalued stock that already carries a rich recovery premium. Broader valuation checks are weak, which tempers how much weight to place on the intrinsic value signal alone. The gap between the two methods largely comes down to whether Boeing can convert its backlog and production plans into sustained, capital efficient cash flows without further strain from costs, execution issues or funding needs. That execution question is what separates a potential opportunity from a valuation that simply reflects the risk.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com