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The Boeing Company (BA) vs. News Corporation (NWS): Breaking Down the Aerospace/Defense Products & Services Industry’s Two Hottest Stocks

The Boeing Company (NYSE:BA) shares are up more than 23.38% this year and recently decreased -1.83% or -$6.77 to settle at $363.85. News Corporation (NASDAQ:NWS), on the other hand, is down -3.01% year to date as of 06/13/2018. It currently trades at $16.10 and has returned 0.00% during the past week.

The Boeing Company (NYSE:BA) and News Corporation (NASDAQ:NWS) are the two most active stocks in the Aerospace/Defense Products & Services industry based on today’s trading volumes. Investors are clearly interested in the two names, but is one a better choice than the other? We will compare the two companies across growth, profitability, risk, valuation, and insider trends to answer this question.

Growth

One of the key things investors look for in a company is the ability to grow earnings at a high compound rate over time. Analysts expect BA to grow earnings at a 17.96% annual rate over the next 5 years.

Profitability and Returns

Growth doesn’t mean much if it comes at the cost of weak profitability. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return. The Boeing Company (BA) has an EBITDA margin of 14.07%. This suggests that BA underlying business is more profitable

Cash Flow



If there’s one thing investors care more about than earnings, it’s cash flow. BA’s free cash flow (“FCF”) per share for the trailing twelve months was +2.91. Comparatively, NWS’s free cash flow per share was +0.29. On a percent-of-sales basis, BA’s free cash flow was 1.82% while NWS converted 2.08% of its revenues into cash flow. This means that, for a given level of sales, NWS is able to generate more free cash flow for investors.

Valuation

BA trades at a forward P/E of 21.20, a P/B of 175.77, and a P/S of 2.23, compared to a P/B of 0.86, for NWS. BA is the expensive of the two stocks on an earnings, book value and sales basis. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.

Analyst Price Targets and Opinions

When investing it’s crucial to distinguish between price and value. As Warren Buffet said, “price is what you pay, value is what you get”. BA is currently priced at a -8.61% to its one-year price target of 398.13.

Insider Activity and Investor Sentiment

Analysts often look at short interest, or the percentage of a company’s float currently being shorted by investors, to aid in their outlook for a particular stock. BA has a short ratio of 1.21 compared to a short interest of 2.44 for NWS. This implies that the market is currently less bearish on the outlook for BA.

Summary

News Corporation (NASDAQ:NWS) beats The Boeing Company (NYSE:BA) on a total of 7 of the 13 factors compared between the two stocks. NWS is growing fastly and has lower financial risk. In terms of valuation, NWS is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, HIBB has better sentiment signals based on short interest.

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