INTL BUSINESS MACHINES CORP (IBM) Stock Fundamental Analysis
NYSE:IBM - New York Stock Exchange, Inc. - US4592001014 - Common Stock - Currency: USD
Overall IBM gets a fundamental rating of 5 out of 10. We evaluated IBM against 82 industry peers in the IT Services industry. While IBM belongs to the best of the industry regarding profitability, there are concerns on its financial health. IBM has a decent growth rate and is not valued too expensively.
1. Profitability
1.1 Basic Checks
In the past year IBM was profitable.
In the past year IBM had a positive cash flow from operations.
IBM had positive earnings in each of the past 5 years.
Each year in the past 5 years IBM had a positive operating cash flow.
1.2 Ratios
The Return On Assets of IBM (4.39%) is better than 61.54% of its industry peers.
With an excellent Return On Equity value of 22.06%, IBM belongs to the best of the industry, outperforming 85.90% of the companies in the same industry.
The Return On Invested Capital of IBM (7.56%) is better than 69.23% of its industry peers.
Measured over the past 3 years, the Average Return On Invested Capital for IBM is below the industry average of 10.31%.
The 3 year average ROIC (7.26%) for IBM is below the current ROIC(7.56%), indicating increased profibility in the last year.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 4.39% | ||
| ROE | 22.06% | ||
| ROIC | 7.56% |
ROA(3y)3.74%
ROA(5y)3.83%
ROE(3y)20.94%
ROE(5y)24.07%
ROIC(3y)7.26%
ROIC(5y)6.26%
1.3 Margins
With a decent Profit Margin value of 9.60%, IBM is doing good in the industry, outperforming 71.79% of the companies in the same industry.
IBM's Profit Margin has declined in the last couple of years.
Looking at the Operating Margin, with a value of 14.68%, IBM belongs to the top of the industry, outperforming 80.77% of the companies in the same industry.
IBM's Operating Margin has improved in the last couple of years.
With a decent Gross Margin value of 56.65%, IBM is doing good in the industry, outperforming 78.21% of the companies in the same industry.
IBM's Gross Margin has been stable in the last couple of years.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 14.68% | ||
| PM (TTM) | 9.6% | ||
| GM | 56.65% |
OM growth 3Y13.36%
OM growth 5Y1.77%
PM growth 3Y-1.4%
PM growth 5Y-10.1%
GM growth 3Y1.05%
GM growth 5Y0.73%
2. Health
2.1 Basic Checks
With a Return on Invested Capital (ROIC) below the Cost of Capital (WACC), IBM is destroying value.
Compared to 1 year ago, IBM has more shares outstanding
IBM has more shares outstanding than it did 5 years ago.
The debt/assets ratio for IBM has been reduced compared to a year ago.
2.2 Solvency
An Altman-Z score of 3.51 indicates that IBM is not in any danger for bankruptcy at the moment.
Looking at the Altman-Z score, with a value of 3.51, IBM is in the better half of the industry, outperforming 61.54% of the companies in the same industry.
IBM has a debt to FCF ratio of 4.46. This is a neutral value as IBM would need 4.46 years to pay back of all of its debts.
Looking at the Debt to FCF ratio, with a value of 4.46, IBM is in line with its industry, outperforming 53.85% of the companies in the same industry.
A Debt/Equity ratio of 1.83 is on the high side and indicates that IBM has dependencies on debt financing.
IBM has a Debt to Equity ratio of 1.83. This is in the lower half of the industry: IBM underperforms 76.92% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 1.83 | ||
| Debt/FCF | 4.46 | ||
| Altman-Z | 3.51 |
ROIC/WACC0.7
WACC10.77%
2.3 Liquidity
IBM has a Current Ratio of 1.04. This is a normal value and indicates that IBM is financially healthy and should not expect problems in meeting its short term obligations.
With a Current ratio value of 1.04, IBM is not doing good in the industry: 79.49% of the companies in the same industry are doing better.
A Quick Ratio of 1.00 indicates that IBM should not have too much problems paying its short term obligations.
IBM has a worse Quick ratio (1.00) than 78.21% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.04 | ||
| Quick Ratio | 1 |
3. Growth
3.1 Past
The Earnings Per Share has been growing slightly by 7.49% 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 1.44% in the past year.
The Revenue has been growing slightly by 1.69% on average over the past years.
EPS 1Y (TTM)7.49%
EPS 3Y1.19%
EPS 5Y-4.21%
EPS Q2Q%1.29%
Revenue 1Y (TTM)1.44%
Revenue growth 3Y3.05%
Revenue growth 5Y1.69%
Sales Q2Q%0.99%
3.2 Future
The Earnings Per Share is expected to grow by 5.23% on average over the next years.
The Revenue is expected to grow by 4.99% on average over the next years.
EPS Next Y4.84%
EPS Next 2Y5.64%
EPS Next 3Y6.18%
EPS Next 5Y5.23%
Revenue Next Year3.55%
Revenue Next 2Y4.18%
Revenue Next 3Y4.27%
Revenue Next 5Y4.99%
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.
The Revenue growth rate is accelerating: in the next years the growth will be better than in the last years.
4. Valuation
4.1 Price/Earnings Ratio
A Price/Earnings ratio of 24.44 indicates a rather expensive valuation of IBM.
Based on the Price/Earnings ratio, IBM is valued a bit cheaper than 65.38% of the companies in the same industry.
The average S&P500 Price/Earnings ratio is at 29.43. IBM is around the same levels.
A Price/Forward Earnings ratio of 23.31 indicates a rather expensive valuation of IBM.
64.10% of the companies in the same industry are more expensive than IBM, based on the Price/Forward Earnings ratio.
The average S&P500 Price/Forward Earnings ratio is at 22.67. IBM is around the same levels.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 24.44 | ||
| Fwd PE | 23.31 |
4.2 Price Multiples
IBM's Enterprise Value to EBITDA ratio is a bit cheaper when compared to the industry. IBM is cheaper than 60.26% of the companies in the same industry.
Based on the Price/Free Cash Flow ratio, IBM is valued a bit cheaper than the industry average as 73.08% of the companies are valued more expensively.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 18.95 | ||
| EV/EBITDA | 19.74 |
4.3 Compensation for Growth
The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates an expensive valuation of the company.
The decent profitability rating of IBM may justify a higher PE ratio.
PEG (NY)5.05
PEG (5Y)N/A
EPS Next 2Y5.64%
EPS Next 3Y6.18%
5. Dividend
5.1 Amount
IBM has a Yearly Dividend Yield of 2.52%. Purely for dividend investing, there may be better candidates out there.
IBM's Dividend Yield is rather good when compared to the industry average which is at 2.97. IBM pays more dividend than 94.87% of the companies in the same industry.
Compared to an average S&P500 Dividend Yield of 2.28, IBM has a dividend comparable with the average S&P500 company.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.52% |
5.2 History
The dividend of IBM has a limited annual growth rate of 0.83%.
IBM has paid a dividend for at least 10 years, which is a reliable track record.
IBM has decreased its dividend in the last 3 years.
Dividend Growth(5Y)0.83%
Div Incr Years2
Div Non Decr Years2
5.3 Sustainability
IBM pays out 102.04% 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.
DP102.04%
EPS Next 2Y5.64%
EPS Next 3Y6.18%
252.44
-0.79 (-0.31%)
Chartmill FA Rating
GICS SectorInformation Technology
GICS IndustryGroupSoftware & Services
GICS IndustryIT Services
Earnings (Last)
Earnings (Next)
Inst Owners64.25%
Inst Owner Change2.29%
Ins Owners0.09%
Ins Owner Change5.69%
Market Cap233.42B
Analysts70
Price Target258.1 (2.24%)
Short Float %2.12%
Short Ratio4.43
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.52% |
Yearly Dividend6.68
Dividend Growth(5Y)0.83%
DP102.04%
Div Incr Years2
Div Non Decr Years2
Ex-Date
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)2.93%
Min EPS beat(2)2.27%
Max EPS beat(2)3.59%
EPS beat(4)4
Avg EPS beat(4)4.86%
Min EPS beat(4)2.27%
Max EPS beat(4)9.54%
EPS beat(8)8
Avg EPS beat(8)4.73%
EPS beat(12)11
Avg EPS beat(12)3.24%
EPS beat(16)14
Avg EPS beat(16)2.96%
Revenue beat(2)0
Avg Revenue beat(2)-1.29%
Min Revenue beat(2)-1.66%
Max Revenue beat(2)-0.93%
Revenue beat(4)0
Avg Revenue beat(4)-1.04%
Min Revenue beat(4)-1.66%
Max Revenue beat(4)-0.01%
Revenue beat(8)0
Avg Revenue beat(8)-1.1%
Revenue beat(12)4
Avg Revenue beat(12)-0.15%
Revenue beat(16)5
Avg Revenue beat(16)-4.51%
PT rev (1m)18.01%
PT rev (3m)18.44%
EPS NQ rev (1m)-9.75%
EPS NQ rev (3m)-11.14%
EPS NY rev (1m)-0.26%
EPS NY rev (3m)1.03%
Revenue NQ rev (1m)-1.55%
Revenue NQ rev (3m)-2.56%
Revenue NY rev (1m)-1.03%
Revenue NY rev (3m)-1.29%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 24.44 | ||
| Fwd PE | 23.31 | ||
| P/S | 3.72 | ||
| P/FCF | 18.95 | ||
| P/OCF | 17.36 | ||
| P/B | 8.55 | ||
| P/tB | N/A | ||
| EV/EBITDA | 19.74 |
EPS(TTM)10.33
EY4.09%
EPS(NY)10.83
Fwd EY4.29%
FCF(TTM)13.32
FCFY5.28%
OCF(TTM)14.54
OCFY5.76%
SpS67.87
BVpS29.53
TBVpS-47.65
PEG (NY)5.05
PEG (5Y)N/A
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 4.39% | ||
| ROE | 22.06% | ||
| ROCE | 8.85% | ||
| ROIC | 7.56% | ||
| ROICexc | 8.79% | ||
| ROICexgc | 43.5% | ||
| OM | 14.68% | ||
| PM (TTM) | 9.6% | ||
| GM | 56.65% | ||
| FCFM | 19.63% |
ROA(3y)3.74%
ROA(5y)3.83%
ROE(3y)20.94%
ROE(5y)24.07%
ROIC(3y)7.26%
ROIC(5y)6.26%
ROICexc(3y)8.29%
ROICexc(5y)7.07%
ROICexgc(3y)40.75%
ROICexgc(5y)31.79%
ROCE(3y)8.5%
ROCE(5y)7.33%
ROICexcg growth 3Y26.58%
ROICexcg growth 5Y17.04%
ROICexc growth 3Y17.55%
ROICexc growth 5Y7.25%
OM growth 3Y13.36%
OM growth 5Y1.77%
PM growth 3Y-1.4%
PM growth 5Y-10.1%
GM growth 3Y1.05%
GM growth 5Y0.73%
F-Score7
Asset Turnover0.46
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 1.83 | ||
| Debt/FCF | 4.46 | ||
| Debt/EBITDA | 3.59 | ||
| Cap/Depr | 24.15% | ||
| Cap/Sales | 1.8% | ||
| Interest Coverage | 250 | ||
| Cash Conversion | 96.89% | ||
| Profit Quality | 204.5% | ||
| Current Ratio | 1.04 | ||
| Quick Ratio | 1 | ||
| Altman-Z | 3.51 |
F-Score7
WACC10.77%
ROIC/WACC0.7
Cap/Depr(3y)35.46%
Cap/Depr(5y)39.55%
Cap/Sales(3y)2.66%
Cap/Sales(5y)3.73%
Profit Quality(3y)294.17%
Profit Quality(5y)264.98%
High Growth Momentum
Growth
EPS 1Y (TTM)7.49%
EPS 3Y1.19%
EPS 5Y-4.21%
EPS Q2Q%1.29%
EPS Next Y4.84%
EPS Next 2Y5.64%
EPS Next 3Y6.18%
EPS Next 5Y5.23%
Revenue 1Y (TTM)1.44%
Revenue growth 3Y3.05%
Revenue growth 5Y1.69%
Sales Q2Q%0.99%
Revenue Next Year3.55%
Revenue Next 2Y4.18%
Revenue Next 3Y4.27%
Revenue Next 5Y4.99%
EBIT growth 1Y4.79%
EBIT growth 3Y16.81%
EBIT growth 5Y3.49%
EBIT Next Year54.39%
EBIT Next 3Y20.12%
EBIT Next 5Y10.85%
FCF growth 1Y1.63%
FCF growth 3Y7.1%
FCF growth 5Y0.76%
OCF growth 1Y-3.48%
OCF growth 3Y1.67%
OCF growth 5Y-1.86%