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Why It's Time to Buy Boeing

By Rich Smith - Apr 9, 2013 at 10:07PM

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Price, growth, and cash -- three great reasons to own Boeing today.

It might not be obvious to the casual observer, but right now, Boeing (BA 2.28%) stock offers one of the best values available in the entire aerospace and defense industry. Why?

Three reasons.

Boeing is a contender
At first glance, Boeing stock looks firmly in the running as a good investment idea for defense investors. Stacked up against comparable players in this industry, Boeing's 17 price-to-earnings ratio ranks between the pricier 17.6 P/E at United Technologies (RTX 0.95%), and the cheaper 11.4 P/E at Lockheed Martin (LMT 0.83%). So the stock's neither outrageously expensive nor suspiciously cheap.

Boeing has the best prospects
Boeing stock also looks likely to prosper to a greater extent than its rivals. If United Tech is in the midst of a corporate restructuring that may or may not pay off, and Lockheed Martin is dogged by continuing difficulties with its F-35 fighter jet and the cancellation of its F-22 stealth fighter, all systems look like a go for Boeing as it sells cheaper F-15s and F/A-18s to the Pentagon, while the popular Boeing 737 continues to rack up record sales and works to get the kinks out of its popular 787 Dreamliner.

When all's said and done, analysts agree: Boeing has the brightest prospects for earnings growth going forward.

Boeing pays you best
Perhaps most important to investors, though, is the simple fact that out of the three big aerospace names discussed above, Boeing is generating the most cash from its business -- and gives you the biggest free cash flow bang for the buck.

Measured by dividing its market capitalization (the price you pay for its stock) into its free cash flow (the money your investment generates for you), Boeing stock offers investors quite simply the best "free cash flow yield" of the three firms named. Put even more simply, for every dollar you invest in a share of Boeing stock today, you can expect the firm to generate nearly 9% worth of real, cash profits on your investment.

BA Free Cash Flow Yield Chart

Source: BA Free Cash Flow Yield data by YCharts.

Boeing may ultimately use this cash to pay you bigger dividends (it already pays a 2.3% dividend), to buy back shares (increasing the size of your stake in the company for every share it takes off the table), or to reinvest in its business and ensure it maintains "air superiority" for years to come. Any way you look at it, though, Boeing's ability to generate cash offers investors a great reason to invest.

And that, Fools, is the reason I think now's a great time to buy Boeing stock.

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Stocks Mentioned

The Boeing Company Stock Quote
The Boeing Company
BA
$139.84 (2.28%) $3.12
Raytheon Technologies Corporation Stock Quote
Raytheon Technologies Corporation
RTX
$97.02 (0.95%) $0.91
Lockheed Martin Corporation Stock Quote
Lockheed Martin Corporation
LMT
$433.52 (0.83%) $3.56

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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