Evaluation of Boeing’s Return on Equity

Sep 07, 2022 By Triston Martin

The fundamentals of the Boeing Company make it easier for banks to Analyze Boeing's Return on Equity, the factors that lead to Boeing's economic success. Traders may also use this information to forecast Boeing stock's direction. The technical and fundamental feature provides a method for determining the true worth of Boeing by analyzing the company's existing fiscal and economic metrics. These indicators include the cash flow documentation, the financial statement, the operating income trends, and numerous micro-level metrics and solvency indicators linked with Boeing stock. In addition, the technical and fundamental component offers a way to calculate Boeing's intrinsic worth.

With a total income of $5.6 billion and a median of $10.6 billion in net capital employed, The Corporation (NYSE: BA) was able to accomplish earnings per share (ROE) of 52.9 percent over the previous year, which concluded in September 2015. The most recent Boeing ROE for Boeing is in line with its long-term average and performs well compared to the company's competitors. High return on assets and a strong capital ratio have boosted Boeing's return on equity above its rivals, notwithstanding its relatively low profitability ratio. The two significant elements that drive the fluctuation in ROE are debt financing and profitability ratio.

Comparisons to the Past and Contemporary Works

The return on equity for Boeing is 52.9 percent, which is the highest result since the company's full-year 2012 ROE was 83.1 percent. During the previous ten years, the return on equity for the firm fluctuated anywhere from 23 percent to 314.6 percent. Within its social circle, comprised of aerospace businesses operating in both the military and commercial sectors, Boeing also has one of the greatest ROEs. Only Lockheed Martin's ROE of 96.82 percent was better during the last year, with both companies' periods ending 31 December 2015. The next-highest ROE was achieved by Airbus, which was 38.1 percent. The aggregate average ROE was 26.13 percent, which is much lower than the current ROE number for Boeing. Even at its lowest point over the previous decade, Boeing's return on equity (ROE) has been similar to the standard for large-cap players in the aviation and defense market. This exemplifies the degree to which the business compares well to its competitors in this respect.

Evaluation of the Return on Equity for Boeing

Return on Equity, often known as ROE, is a measure that indicates to Boeing investors how effectively their capital is being employed or reinvested by the firm. When evaluating a firm's profitability or the efficiency of its management concerning the amount of capital contributed by shareholders, this ratio may be beneficial. Return on equity (ROE) quantifies how profitably a business turns its capital into cash flow.

Assessment by DuPont

The DuPont assessment is a powerful method for identifying the many elements that lead to ROE. ROE may be determined by collectively combining the significantly improved inventory turnover ratio and the gross profit margin. Because ROE can be disassembled into its component financial indicators, it can be observed more closely.

Over a year that concluded in September 2015, Boeing had a margin of net profits of 5.79 percent. Because its net margin varied from 1.92 percent to 6.14 percent during the previous years, the present number is closer to the higher end of this minimal variation. When compared to its competitors, Boeing ranks among the smallest in profitability. The median for the circle of acquaintances is 9.04 percent, and only Airbus has reported a value lower than that (4.5 percent).

The profitability for Boeing was 1.01 for the year that ended in September 2015, which was measured. The cash ratio for the firm has reached as much as 1.2 in the prior decade; however, it is currently at its lowest point in the last decade. This suggests that the growth of total assets has not kept pace with the rise of sales, whereas an increase in inventories has been the critical element fueling global liabilities.

Even though it was low in the perspective of history, Boeing's return on assets in September 2015 was greater than that of all of its competitors, with the notable exception of Lockheed Martin, which had a ratio of 1.2. The cash conversion cycle for competitors was found to be 0.86 on average. Airbus, Boeing's main competitor in the market for commercial airplanes, only found a way to turn around 0.64 of its assets throughout the time. Boeing has generated income from its investment portfolio effectively and efficiently compared to other aircraft corporations.

The profitability for Boeing was 14.7 in the twelve months that ended in September 2015 and was determined by dividing the company's overall average liabilities by its average equity. This is the greatest leverage ratio for the firm since 2012, and throughout the previous decade, the ratio fluctuated anywhere from 5.4 to 29.2 times. The return on equity (roe for Boeing is significantly greater than its peer group, with a score of 3.9 as its average. On the other hand, Airbus and Aerospace, the companies that most closely resemble Boeing, possess capital equivalents of 16.4 and 14.0, correspondingly. Even though Boeing's working capital is comparable to its most direct competitors, the higher payout multiplier implies that Boeing is retaining a cash position with substantial financial exposure.


The high return on equity that Boeing generates compared to its competitors is primarily the result of its high level of financial debt; however, rapid net profit is also a significant contributor. Although historical shifts in ROE can be traced back to each of the three components that make up the DuPont assessment, profitability has shown to be the most unpredictable. Because of the unusually substantial financial leverage in Boeing's asset base, most of the company's funding comes from debt; hence, even tiny shifts in the foundations of the business can cause rather significant fluctuations in ROE.

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