BA Stock Report

2-Year Price History

Ockham’s Rating

BA Revenue

For a long time, value investors have used the current share price relative to sales per share levels as an important valuation tool. We utilize a historical weighted average methodology that treats recent years more importantly in the calculation. When looking at BA through this framework, we can see that our weighted average historical high and low Price to Sales per share ratios over the last 10 years are 0.99x and 0.62x respectively.

Utilizing this range we can see that BA’s current Price to Sales per share ratio of 0.43x is significantly below its average levels historically. In fact, with a current price of $40.83, BA is a full 47% below its average Price to Sales ratio at comparable sales levels. This is a rare occurrence and, when taken in context of the other areas of our analysis, can be a strong positive for our outlook for BA.

BA Cash Earnings

As a value investment framework, Ockham Research is similar to a private equity firm in terms of our valuation methods. We are always on the lookout for value in the form of sales and cash numbers. In the case of BA, Ockham views their current Cash Earnings as significantly below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for BA, the current level of Cash Earnings compared to its historical levels helps identify where BA is in relation to what the investing community was willing to pay for this level of Cash Earnings in the past. With a historical high Cash Earnings per share ratio of 14.37 and a historical low Cash Earnings per share ratio of 8.91, an investor can relate where value becomes optimal.

So what does "significantly below" mean when we talk about Price to Cash Earnings numbers for BA? From the Ockham perspective, we are looking specifically at BA to see if the market is recognizing the huge disparity between BA’s past stock price to Cash Earnings ratio to today’s levels. At a difference of 29% below the average historical Price to Cash Earnings ratio, our view would be quite positive at this point. However, as with all metrics, we need to also take other factors into account when looking at BA. While we view better Cash Earnings metrics as very important, if the market is slow to identify this value, or if Cash Earnings were to fall from these levels, we would become more neutral in our stance.

BA Dividends

While it is not necessary to pay an attractive dividend or a dividend at all, to receive a positive rating from Ockham, we view dividends as an additionally helpful measure in determining the future potential of any company.

In BA’s case, the estimated annual dividend is $1.68 resulting in a current dividend yield of 4.11%. Similar to our review of Sales and Cash Earnings per share, we evaluate dividend yields from BA against the historic high and low levels over the past 10 years. The highest dividend yield from BA over this period was 5.78% while the lowest dividend yield was 0.79% BA’s current dividend yield is therefore significantly higher than its median dividend yield historically. In fact, the current yield is 25.11% above the median which weighs very positively on our analysis of BA.