INTL BUSINESS MACHINES CORP (IBM) Stock Fundamental Analysis
USA - New York Stock Exchange - NYSE:IBM - US4592001014 - Common Stock
292.44 USD
-2.23 (-0.76%)
292 USD
-0.44 (-0.15%)
Overall IBM gets a fundamental rating of 4 out of 10. We evaluated IBM against 88 industry peers in the IT Services industry. IBM has an excellent profitability rating, but there are concerns on its financial health. While showing a medium growth rate, IBM is valued expensive at the moment.
1. Profitability
1.1 Basic Checks
- IBM had positive earnings in the past year.
- In the past year IBM had a positive cash flow from operations.
- Each year in the past 5 years IBM has been profitable.
- IBM had a positive operating cash flow in each of the past 5 years.
1.2 Ratios
- The Return On Assets of IBM (5.40%) is better than 69.32% of its industry peers.
- With an excellent Return On Equity value of 28.34%, IBM belongs to the best of the industry, outperforming 88.64% of the companies in the same industry.
- IBM has a better Return On Invested Capital (8.07%) than 70.45% of its industry peers.
- The Average Return On Invested Capital over the past 3 years for IBM is significantly below the industry average of 29.06%.
- The last Return On Invested Capital (8.07%) for IBM is above the 3 year average (7.07%), which is a sign of increasing profitability.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 5.4% | ||
| ROE | 28.34% | ||
| ROIC | 8.07% |
ROA(3y)3.74%
ROA(5y)3.83%
ROE(3y)20.94%
ROE(5y)24.07%
ROIC(3y)7.07%
ROIC(5y)6.14%
1.3 Margins
- IBM has a Profit Margin of 12.09%. This is amongst the best in the industry. IBM outperforms 84.09% of its industry peers.
- IBM's Profit Margin has declined in the last couple of years.
- IBM's Operating Margin of 16.06% is amongst the best of the industry. IBM outperforms 84.09% of its industry peers.
- IBM's Operating Margin has been stable in the last couple of years.
- IBM has a Gross Margin of 57.81%. This is in the better half of the industry: IBM outperforms 79.55% of its industry peers.
- In the last couple of years the Gross Margin of IBM has remained more or less at the same level.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 16.06% | ||
| PM (TTM) | 12.09% | ||
| GM | 57.81% |
OM growth 3Y10.6%
OM growth 5Y0.28%
PM growth 3Y-1.4%
PM growth 5Y-10.1%
GM growth 3Y1.05%
GM growth 5Y0.73%
2. Health
2.1 Basic Checks
- The Return on Invested Capital (ROIC) is below the Cost of Capital (WACC), so IBM is destroying value.
- The number of shares outstanding for IBM has been increased compared to 1 year ago.
- IBM has more shares outstanding than it did 5 years ago.
- Compared to 1 year ago, IBM has an improved debt to assets ratio.
2.2 Solvency
- An Altman-Z score of 3.50 indicates that IBM is not in any danger for bankruptcy at the moment.
- IBM has a Altman-Z score (3.50) which is comparable to the rest of the industry.
- IBM has a debt to FCF ratio of 5.27. This is a neutral value as IBM would need 5.27 years to pay back of all of its debts.
- IBM has a Debt to FCF ratio (5.27) which is in line with its industry peers.
- A Debt/Equity ratio of 1.98 is on the high side and indicates that IBM has dependencies on debt financing.
- The Debt to Equity ratio of IBM (1.98) is worse than 73.86% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 1.98 | ||
| Debt/FCF | 5.27 | ||
| Altman-Z | 3.5 |
ROIC/WACC0.93
WACC8.71%
2.3 Liquidity
- IBM has a Current Ratio of 0.93. This is a bad value and indicates that IBM is not financially healthy enough and could expect problems in meeting its short term obligations.
- With a Current ratio value of 0.93, IBM is not doing good in the industry: 80.68% of the companies in the same industry are doing better.
- IBM has a Quick Ratio of 0.93. This is a bad value and indicates that IBM is not financially healthy enough and could expect problems in meeting its short term obligations.
- Looking at the Quick ratio, with a value of 0.89, IBM is doing worse than 81.82% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 0.93 | ||
| Quick Ratio | 0.89 |
3. Growth
3.1 Past
- The Earnings Per Share has been growing slightly by 6.71% over the past year.
- The Earnings Per Share has been decreasing by -4.21% on average over the past years.
- The Revenue has been growing slightly by 4.51% in the past year.
- IBM shows a small growth in Revenue. Measured over the last years, the Revenue has been growing by 1.69% yearly.
EPS 1Y (TTM)6.71%
EPS 3Y1.19%
EPS 5Y-4.21%
EPS Q2Q%15.22%
Revenue 1Y (TTM)4.51%
Revenue growth 3Y3.05%
Revenue growth 5Y1.69%
Sales Q2Q%9.11%
3.2 Future
- The Earnings Per Share is expected to grow by 6.07% on average over the next years.
- The Revenue is expected to grow by 5.12% on average over the next years.
EPS Next Y11%
EPS Next 2Y9.2%
EPS Next 3Y8.19%
EPS Next 5Y6.07%
Revenue Next Year6.79%
Revenue Next 2Y5.7%
Revenue Next 3Y5.19%
Revenue Next 5Y5.12%
3.3 Evolution
- When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.
- When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.
4. Valuation
4.1 Price/Earnings Ratio
- With a Price/Earnings ratio of 26.66, IBM can be considered very expensive at the moment.
- The rest of the industry has a similar Price/Earnings ratio as IBM.
- When comparing the Price/Earnings ratio of IBM to the average of the S&P500 Index (27.21), we can say IBM is valued inline with the index average.
- The Price/Forward Earnings ratio is 23.74, which indicates a rather expensive current valuation of IBM.
- IBM's Price/Forward Earnings ratio is in line with the industry average.
- IBM is valuated at similar levels of the S&P average when we compare the Price/Forward Earnings ratio to 25.98, which is the current average of the S&P500 Index.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 26.66 | ||
| Fwd PE | 23.74 |
4.2 Price Multiples
- The rest of the industry has a similar Enterprise Value to EBITDA ratio as IBM.
- Based on the Price/Free Cash Flow ratio, IBM is valued a bit cheaper than the industry average as 60.23% of the companies are valued more expensively.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 22.83 | ||
| EV/EBITDA | 20.75 |
4.3 Compensation for Growth
- The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates IBM does not grow enough to justify the current Price/Earnings ratio.
- IBM has a very decent profitability rating, which may justify a higher PE ratio.
PEG (NY)2.42
PEG (5Y)N/A
EPS Next 2Y9.2%
EPS Next 3Y8.19%
5. Dividend
5.1 Amount
- IBM has a Yearly Dividend Yield of 2.28%.
- IBM's Dividend Yield is rather good when compared to the industry average which is at 0.44. IBM pays more dividend than 92.05% of the companies in the same industry.
- IBM's Dividend Yield is a higher than the S&P500 average which is at 1.81.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.28% |
5.2 History
- The dividend of IBM has a limited annual growth rate of 0.81%.
- IBM has been paying a dividend for at least 10 years, so it has a reliable track record.
- IBM has decreased its dividend in the last 3 years.
Dividend Growth(5Y)0.81%
Div Incr Years2
Div Non Decr Years2
5.3 Sustainability
- IBM pays out 78.75% of its income as dividend. This is not a sustainable payout ratio.
- IBM's earnings are growing more than its dividend. This makes the dividend growth sustainable.
DP78.75%
EPS Next 2Y9.2%
EPS Next 3Y8.19%
INTL BUSINESS MACHINES CORP / IBM FAQ
What is the fundamental rating for IBM stock?
ChartMill assigns a fundamental rating of 4 / 10 to IBM.
What is the valuation status of INTL BUSINESS MACHINES CORP (IBM) stock?
ChartMill assigns a valuation rating of 3 / 10 to INTL BUSINESS MACHINES CORP (IBM). This can be considered as Overvalued.
How profitable is INTL BUSINESS MACHINES CORP (IBM) stock?
INTL BUSINESS MACHINES CORP (IBM) has a profitability rating of 7 / 10.
What are the PE and PB ratios of INTL BUSINESS MACHINES CORP (IBM) stock?
The Price/Earnings (PE) ratio for INTL BUSINESS MACHINES CORP (IBM) is 26.66 and the Price/Book (PB) ratio is 9.8.
Can you provide the financial health for IBM stock?
The financial health rating of INTL BUSINESS MACHINES CORP (IBM) is 2 / 10.