This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Boeing Bet Rides on 787

If shares of Boeing do go into a nosedive over production delays, as I believe they will, bitter holders will shake their heads over the nosebleed altitude to which valuation has ascended this year. On a trailing basis, over the past 10 years Boeing's price-to-sales multiple has run from 0.69 to 1.1. It's now well above the top end of the scale. Boeing's price-to-book multiple has run from 3.5 to 5 over the past 10 years. It's now almost 6.

Investors pay a premium for an industrial company's shares when they believe it is halfway through a business up cycle and recent earnings growth will extend at least three years into the future. They pay absolute top dollar when they think a company whose growth has been cyclical in the past has found a way to smooth out its ups and downs and bring in steadier cash flows through diversification efforts.

So what are investors thinking? Forgetting the risk of production delays and the loss of face that would entail, steady cash flows could hardly describe Boeing, which is now, and will forever be, tied to the ups and downs of the worldwide demand for commercial and, to a lesser extent, military airplanes.

With energy costs persistently high, global stock markets reeling, worldwide economic growth flattening and the threat of pandemic hanging over travel, the airline business does not look like an ideal place for investment capital at this time -- and that goes double for companies that provide capital equipment, like Boeing.

The case for Boeing shares over the past three years has rested on its brilliant campaign to best its only major rival, Airbus, in obtaining orders for next-generation commercial aircraft. Airbus made a big bet on offering a gigantic new double-decker, wide-body jet that would transport up to 800 people at a time; Boeing made its own big bet on the 787, a more fuel-efficient aircraft that proposes to save airlines money. So far, Boeing has won the race for new orders by a handsome margin.

2 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
TIE $16.50 0.00%
ZOLT $0.00 0.00%
BEAV $62.14 0.00%
BA $148.85 0.00%
INTC $32.00 0.00%

Markets

DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs