The Boeing Company (BA)

By both methods, the value today (DCF $138 · Multiples $157) is below the market price ($190).

Today — expensive, no margin of safety: at $190 trades ~20.5% above its value discounted to today (~$157); the expected return does not even reach the risk-free rate (4.5%).

At 5 years — Preserva valor: the target price ($196) plus dividends yield just enough to preserve nominal capital, below the required 4% floor.

The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$97.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($190) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The price discounts growth (41.0%/year) above our base case (32.0%/year) → it is priced for a demanding scenario and leaves little cushion against a slowdown.

That growth implies ~$7.4 bn of owner earnings in year 5 (vs ~$5.3 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). The flow is returned almost in full (dividend + buyback) or redeployed into the operation, so that EV stays roughly flat and multiples compress because the metric grows, not because of cash accumulation. The valuation is done on Resultado operativo normalizado (EV/EBIT). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Year 0 is the twelve months ended 30-Jun-2026: revenue of US$93.995 billion taken from XBRL. The year-0 operating margin is not that of the full accounting period and that is the most important decision in this model. Operating income for the last twelve months (US$4.600 billion) includes the gain of US$9,566 million on the sale of Digital Aviation Solutions, closed on 31-Oct-2025 for US$10.55 billion, which is money that does not come back; and it also includes the US$4,899 million reach-forward charge on the 777X and 767 programs recognized in the second half of 2025. Taking the raw period would capitalize a one-off gain, and deducting only that gain would leave operating income of minus US$4.97 billion carrying a program charge concentrated in a single quarter. The chosen anchor is the first half of 2026 from the release of 28-Jul-2026: operating income of US$604 million on a 1.3% margin, which is the most recent and cleanest evidence of the ongoing operation. That 1.3% is applied to the period's revenue level and gives normalized operating income of approximately US$1.2 billion for year 0. The revenue path starts at 11.1% and declines smoothly to 5.0% in year 5. There is no guidance: the second-quarter 2026 release publishes no revenue or earnings per share projections, and that is declared. The XBRL trajectory is irregular by construction (16.8%, minus 14.5%, 34.5% and 24.8% over the last twelve months): the 2024 decline reflects the 53-day IAM 751 union strike that halted production of most commercial aircraft, and the two subsequent jumps are the recovery from that depressed base, so they are not extrapolable. The starting point rests on the verifiable delivery pace: 171 commercial aircraft in the second quarter of 2026 against 150 a year earlier, 314 in the half against 280, with the 737 rate on its way to 47 units a month. The 5.0% end point is anchored in the record backlog of US$715.3 billion, with more than 6,200 commercial aircraft. The valuation is by parts because the three segments have different economics: Commercial Airplanes is capital-intensive manufacturing with tiered fixed-price contracts, Defense, Space & Security operates under the United States government appropriations regime with exposure to fixed-price development contracts, and Global Services is a high-margin aftermarket business (18.1% in the second quarter of 2026). The exit multiple is composed segment by segment and the resulting blend stays within the archetype band. The model is at the enterprise level: cash and short-term investments of US$20.0 billion and total debt of US$45.9 billion from the balance sheet at 30-Jun-2026 enter the bridge, and operating flow accumulates because the company pays no ordinary dividend and repurchases no shares. The period's change in working capital is not separable from customer advances with the available data and is taken as zero, declared.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (EV falls as cash increases). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $196 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $190, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $196 in 5 years and a required return of 4.5% annually, the maximum to pay today is $157. Against the current market price ($190), the margin of safety is -20.5% (trades above the maximum → a premium is paid) and the total return at that price would be 0.7% annually.

• Estimated return. Estimated return is negative in the base case; the favorable scenario reaches +1% annually, still below the average expected return on equities.
• Entry multiple. Current normalized operating income is nearly nil: today's multiple is not readable and only becomes meaningful toward year 5.
• Range width. Between +1% and +1%: the value depends almost entirely on the margin the company reaches.
• Second lens. The discounted cash flow is more demanding than the multiples valuation, consistent with current cash flow that is nearly nil.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✕ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (89%, cash vs. accruals)
• ✕ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Predictable cash generation. There is none: free cash flow was negative in three of the last four fiscal years and only turned in the second quarter of 2026.
• Return on capital. The normalized 3.3% stands well below the 10% bar.
• Reinvestment runway. Wide and contracted: more than 6,200 aircraft on order require capacity, and capex grows with the production rate.
• Earnings quality. Low readability: earnings are dominated by program charges and by a gain on the sale of assets.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

Boeing's revenue engine is deliveries times average contract price: every aircraft delivered recognizes revenue and margin, and every aircraft not delivered stays in inventory consuming cash. That is why the quarterly delivery pace is the leading indicator of results, and the backlog, today at a record $715.3 billion with more than 6,200 commercial aircraft, is what sets the ceiling on possible volume in the coming years.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Backlog. Record $715.3 billion, equivalent to more than seven years of billings at the current rate.
• Delivery volume. 600 commercial aircraft in 2025 versus 348 in 2024; 171 in the second quarter of 2026 versus 150.
• Market growth. The global fleet grows ~3.1% annually according to the company's own 20-year forecast, which estimates demand for about 43,600 new aircraft: long-term expansion comes from volume, not price.
• Market share. Delivery capacity hit by the 2024-2025 crisis (348 commercial aircraft delivered versus 600 in 2025), against international competitors the company describes as aggressive in defending or expanding their share.

• Will still be used in ten years. Commercial air travel and military aviation have no technological substitute in sight.
• Differentiated product. Effective duopoly with a certification barrier: this is not an industry of undifferentiated goods.
• Pricing power. Limited: contracts are fixed-price with indexed escalation, signed years before delivery.
• Operating leverage. Very high and currently working in the favorable direction: each additional delivery falls on an already-paid fixed structure.
• Behavior in a recession. Weak: aircraft demand follows airline profitability and financing conditions, though the backlog cushions it.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Leverage (net debt / EBITDA)Net cash $0 bn
• ✕Interest coverage (EBIT / interest)0.5x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 89% of ROIC
• ✕Value creation (ROIC − 10% bar)-7pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 1.8x
• –Float / working capitalNeutral WC
• !Dilution (SBC % of revenue + shares)SBC 0.5% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Net debt. Approximately $25.9 billion against operating income that is normalized but still near zero.
• Liquidity. $20.0 billion in cash and short-term investments as of June 30, 2026.
• Book equity. $6.1 billion after years of losses: the capacity to absorb another cycle of charges is limited.
• Free cash flow. Negative $823 million for the half, with the second quarter positive at $631 million.

How cash comes in and how it is deployed. In green, the business's own cash (the owner-FCF it generates and reinvests); in gray, the float and credit — customer and funding money, which is not the shareholder's.

Capital allocation is dominated by reinvestment in production capacity and by the acquisition of Spirit AeroSystems. The only payment to shareholders is the dividend on the mandatory convertible preferred shares; the ordinary dividend and the buyback remain suspended since 2020.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Capital allocation. Defensive and forced by the crisis: equity issuance, asset sale and an acquisition to bring fuselage manufacturing back in-house.
• Shareholder returns. No ordinary dividend or buyback since 2020; cash is directed to reducing debt and sustaining production.
• Candor about mistakes. Program charges are recognized and quantified up front in the financial statements.
• Insider ownership. Directors and executives as a group own approximately 1% of the share count; there is no controlling shareholder.

• Reported earnings in recent fiscal years are dominated by program charges and by a gain on the sale of assets, which makes no traditional multiple readable: there is no current P/E or EV/EBITDA that serves as a reference.
• The market already prices in much of the margin normalization projected by the base case, so the current price reflects an operating recovery that is still in progress and not fully verified.
• The margin recovery is visible but still small in absolute terms: operating income for the half was $604 million on revenue of more than $46 billion.

The gap between perception and reality is limited: the market already recognizes the backlog and the operating turnaround, and the price incorporates much of the margin normalization projected by the base case.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -22%/year (-71% total): the margin of safety protects the downside. The bull (+12%/year, +74% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Program execution. Reestimation charges of $5,283 million in 2025 and $4,079 million in 2024 on the 777X and 767.
• Fixed-price contracts. 60% of defense revenue and all commercial sales carry any cost overrun on the company's own account.
• Regulation. The aviation authority must approve production rate increases since the January 2024 accident.
• Labor conflict. Two long strikes in two years, both despite tentative agreements already reached with the unions.
• Budget dependence. 35% of revenue comes from contracts with the U.S. government, subject to the appropriations cycle.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  Fails the quality gate: wide moat, eroding.

• Peter Lynch Growth at a reasonable price (GARP)

  A cyclical growing 32% at a multiple/growth of 4.5 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 1% (EBIT/EV) + ROIC 3% → falls outside the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts 41% vs our 32%: priced for perfection, no favorable mispricing.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -22%/yr over 5y (material loss) → risk of permanent capital loss.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, eroding; sources: efficient scale, intangibles, switching costs → partially passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  The price demands 41% growth, far above our 32% — heroic assumptions.