INTL BUSINESS MACHINES CORP (IBM) Stock Fundamental Analysis
NYSE:IBM - New York Stock Exchange, Inc. - US4592001014 - Common Stock - Currency: USD
We assign a fundamental rating of 5 out of 10 to IBM. IBM was compared to 82 industry peers in the IT Services industry. While IBM has a great profitability rating, there are quite some concerns on its financial health. IBM is not valued too expensively and it also shows a decent growth rate.
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.
In the past 5 years IBM has always been profitable.
In the past 5 years IBM always reported a positive cash flow from operatings.
1.2 Ratios
The Return On Assets of IBM (4.76%) is better than 63.29% of its industry peers.
With an excellent Return On Equity value of 26.17%, IBM belongs to the best of the industry, outperforming 89.87% of the companies in the same industry.
IBM has a Return On Invested Capital of 7.33%. This is in the better half of the industry: IBM outperforms 68.35% of its industry peers.
The Average Return On Invested Capital over the past 3 years for IBM is below the industry average of 9.86%.
The last Return On Invested Capital (7.33%) for IBM is above the 3 year average (6.36%), which is a sign of increasing profitability.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 4.76% | ||
| ROE | 26.17% | ||
| ROIC | 7.33% |
ROA(3y)3.73%
ROA(5y)4.19%
ROE(3y)23.72%
ROE(5y)28.71%
ROIC(3y)6.36%
ROIC(5y)5.87%
1.3 Margins
IBM has a Profit Margin of 10.22%. This is in the better half of the industry: IBM outperforms 74.68% of its industry peers.
In the last couple of years the Profit Margin of IBM has grown nicely.
IBM has a Operating Margin of 14.48%. This is amongst the best in the industry. IBM outperforms 82.28% of its industry peers.
In the last couple of years the Operating Margin of IBM has declined.
The Gross Margin of IBM (56.53%) is better than 77.22% of its industry peers.
IBM's Gross Margin has improved in the last couple of years.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 14.48% | ||
| PM (TTM) | 10.22% | ||
| GM | 56.53% |
OM growth 3Y10.99%
OM growth 5Y-4.17%
PM growth 3Y6.18%
PM growth 5Y2.03%
GM growth 3Y-0.29%
GM growth 5Y3.62%
2. Health
2.1 Basic Checks
IBM has a Return on Invested Capital (ROIC), which is below the Cost of Capital (WACC), which means it is destroying value.
IBM has more shares outstanding than it did 1 year ago.
IBM has more shares outstanding than it did 5 years ago.
Compared to 1 year ago, IBM has a worse debt to assets ratio.
2.2 Solvency
IBM has an Altman-Z score of 3.40. This indicates that IBM is financially healthy and has little risk of bankruptcy at the moment.
With a Altman-Z score value of 3.40, IBM perfoms like the industry average, outperforming 53.16% of the companies in the same industry.
The Debt to FCF ratio of IBM is 4.76, which is a neutral value as it means it would take IBM, 4.76 years of fcf income to pay off all of its debts.
IBM's Debt to FCF ratio of 4.76 is in line compared to the rest of the industry. IBM outperforms 51.90% of its industry peers.
IBM has a Debt/Equity ratio of 2.17. This is a high value indicating a heavy dependency on external financing.
IBM's Debt to Equity ratio of 2.17 is on the low side compared to the rest of the industry. IBM is outperformed by 81.01% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 2.17 | ||
| Debt/FCF | 4.76 | ||
| Altman-Z | 3.4 |
ROIC/WACC0.69
WACC10.55%
2.3 Liquidity
IBM has a Current Ratio of 1.06. This is a normal value and indicates that IBM is financially healthy and should not expect problems in meeting its short term obligations.
The Current ratio of IBM (1.06) is worse than 75.95% of its industry peers.
IBM has a Quick Ratio of 1.01. This is a normal value and indicates that IBM is financially healthy and should not expect problems in meeting its short term obligations.
IBM has a worse Quick ratio (1.01) than 78.48% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.06 | ||
| Quick Ratio | 1.01 |
3. Growth
3.1 Past
IBM shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 10.06%, which is quite good.
The Earnings Per Share has been decreasing by -7.01% on average over the past years.
IBM shows a small growth in Revenue. In the last year, the Revenue has grown by 2.31%.
IBM shows a decrease in Revenue. Measured over the last years, the Revenue has been decreasing by -4.92% yearly.
EPS 1Y (TTM)10.06%
EPS 3Y3.49%
EPS 5Y-7.01%
EPS Q2Q%4.55%
Revenue 1Y (TTM)2.31%
Revenue growth 3Y3.88%
Revenue growth 5Y-4.92%
Sales Q2Q%1.46%
3.2 Future
The Earnings Per Share is expected to grow by 5.32% on average over the next years.
Based on estimates for the next years, IBM will show a small growth in Revenue. The Revenue will grow by 4.02% on average per year.
EPS Next Y7.4%
EPS Next 2Y6.3%
EPS Next 3Y5.68%
EPS Next 5Y5.32%
Revenue Next Year1.71%
Revenue Next 2Y3.11%
Revenue Next 3Y3.43%
Revenue Next 5Y4.02%
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
The Price/Earnings ratio is 21.86, which indicates a rather expensive current valuation of IBM.
IBM's Price/Earnings ratio is a bit cheaper when compared to the industry. IBM is cheaper than 70.89% of the companies in the same industry.
IBM's Price/Earnings ratio indicates a valuation a bit cheaper than the S&P500 average which is at 28.39.
Based on the Price/Forward Earnings ratio of 20.70, the valuation of IBM can be described as rather expensive.
Based on the Price/Forward Earnings ratio, IBM is valued a bit cheaper than the industry average as 72.15% of the companies are valued more expensively.
Compared to an average S&P500 Price/Forward Earnings ratio of 24.37, IBM is valued at the same level.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 21.86 | ||
| Fwd PE | 20.7 |
4.2 Price Multiples
65.82% of the companies in the same industry are more expensive than IBM, based on the Enterprise Value to EBITDA ratio.
Based on the Price/Free Cash Flow ratio, IBM is valued cheaper than 82.28% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 17.48 | ||
| EV/EBITDA | 18.13 |
4.3 Compensation for Growth
The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates an expensive valuation of the company.
IBM has a very decent profitability rating, which may justify a higher PE ratio.
PEG (NY)2.96
PEG (5Y)N/A
EPS Next 2Y6.3%
EPS Next 3Y5.68%
5. Dividend
5.1 Amount
IBM has a Yearly Dividend Yield of 2.96%.
IBM's Dividend Yield is rather good when compared to the industry average which is at 2.96. IBM pays more dividend than 96.20% of the companies in the same industry.
IBM's Dividend Yield is a higher than the S&P500 average which is at 2.27.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.96% |
5.2 History
The dividend of IBM has a limited annual growth rate of 1.21%.
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)1.21%
Div Incr Years2
Div Non Decr Years2
5.3 Sustainability
95.65% of the earnings are spent on dividend by IBM. This is not a sustainable payout ratio.
IBM's earnings are growing more than its dividend. This makes the dividend growth sustainable.
DP95.65%
EPS Next 2Y6.3%
EPS Next 3Y5.68%
INTL BUSINESS MACHINES CORP
NYSE:IBM (1/28/2025, 3:14:04 PM)
224.76
+0.63 (+0.28%)
Chartmill FA Rating
GICS SectorInformation Technology
GICS IndustryGroupSoftware & Services
GICS IndustryIT Services
Earnings (Last)
Earnings (Next)
Inst Owners61.42%
Inst Owner Change-0.45%
Ins Owners0.08%
Ins Owner Change0.12%
Market Cap207.82B
Analysts69.23
Price Target218.72 (-2.69%)
Short Float %2.37%
Short Ratio5.62
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.96% |
Yearly Dividend6.63
Dividend Growth(5Y)1.21%
DP95.65%
Div Incr Years2
Div Non Decr Years2
Ex-DateN/A
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)5.9%
Min EPS beat(2)2.27%
Max EPS beat(2)9.54%
EPS beat(4)4
Avg EPS beat(4)4.32%
Min EPS beat(4)1.41%
Max EPS beat(4)9.54%
EPS beat(8)7
Avg EPS beat(8)4.16%
EPS beat(12)11
Avg EPS beat(12)2.98%
EPS beat(16)14
Avg EPS beat(16)3.64%
Revenue beat(2)0
Avg Revenue beat(2)-0.83%
Min Revenue beat(2)-1.66%
Max Revenue beat(2)-0.01%
Revenue beat(4)0
Avg Revenue beat(4)-0.94%
Min Revenue beat(4)-1.66%
Max Revenue beat(4)-0.01%
Revenue beat(8)1
Avg Revenue beat(8)-0.89%
Revenue beat(12)5
Avg Revenue beat(12)0.23%
Revenue beat(16)5
Avg Revenue beat(16)-6.01%
PT rev (1m)0.36%
PT rev (3m)0.85%
EPS NQ rev (1m)0%
EPS NQ rev (3m)0.15%
EPS NY rev (1m)0%
EPS NY rev (3m)0.5%
Revenue NQ rev (1m)0%
Revenue NQ rev (3m)-0.08%
Revenue NY rev (1m)0%
Revenue NY rev (3m)-0.63%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 21.86 | ||
| Fwd PE | 20.7 | ||
| P/S | 3.32 | ||
| P/FCF | 17.48 | ||
| P/OCF | 15.3 | ||
| P/B | 8.5 | ||
| P/tB | N/A | ||
| EV/EBITDA | 18.13 |
EPS(TTM)10.28
EY4.57%
EPS(NY)10.86
Fwd EY4.83%
FCF(TTM)12.86
FCFY5.72%
OCF(TTM)14.69
OCFY6.53%
SpS67.68
BVpS26.44
TBVpS-51.62
PEG (NY)2.96
PEG (5Y)N/A
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 4.76% | ||
| ROE | 26.17% | ||
| ROCE | 8.59% | ||
| ROIC | 7.33% | ||
| ROICexc | 8.43% | ||
| ROICexgc | 39.44% | ||
| OM | 14.48% | ||
| PM (TTM) | 10.22% | ||
| GM | 56.53% | ||
| FCFM | 19% |
ROA(3y)3.73%
ROA(5y)4.19%
ROE(3y)23.72%
ROE(5y)28.71%
ROIC(3y)6.36%
ROIC(5y)5.87%
ROICexc(3y)7.1%
ROICexc(5y)6.52%
ROICexgc(3y)32.98%
ROICexgc(5y)26.78%
ROCE(3y)7.45%
ROCE(5y)6.89%
ROICexcg growth 3Y48.17%
ROICexcg growth 5Y7.12%
ROICexc growth 3Y21.44%
ROICexc growth 5Y-11.37%
OM growth 3Y10.99%
OM growth 5Y-4.17%
PM growth 3Y6.18%
PM growth 5Y2.03%
GM growth 3Y-0.29%
GM growth 5Y3.62%
F-Score6
Asset Turnover0.47
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 2.17 | ||
| Debt/FCF | 4.76 | ||
| Debt/EBITDA | 3.85 | ||
| Cap/Depr | 35.89% | ||
| Cap/Sales | 2.7% | ||
| Interest Coverage | 250 | ||
| Cash Conversion | 98.64% | ||
| Profit Quality | 185.87% | ||
| Current Ratio | 1.06 | ||
| Quick Ratio | 1.01 | ||
| Altman-Z | 3.4 |
F-Score6
WACC10.55%
ROIC/WACC0.69
Cap/Depr(3y)41.79%
Cap/Depr(5y)44.32%
Cap/Sales(3y)3.67%
Cap/Sales(5y)4.38%
Profit Quality(3y)284.2%
Profit Quality(5y)249.23%
High Growth Momentum
Growth
EPS 1Y (TTM)10.06%
EPS 3Y3.49%
EPS 5Y-7.01%
EPS Q2Q%4.55%
EPS Next Y7.4%
EPS Next 2Y6.3%
EPS Next 3Y5.68%
EPS Next 5Y5.32%
Revenue 1Y (TTM)2.31%
Revenue growth 3Y3.88%
Revenue growth 5Y-4.92%
Sales Q2Q%1.46%
Revenue Next Year1.71%
Revenue Next 2Y3.11%
Revenue Next 3Y3.43%
Revenue Next 5Y4.02%
EBIT growth 1Y9.16%
EBIT growth 3Y15.3%
EBIT growth 5Y-8.88%
EBIT Next Year47.23%
EBIT Next 3Y17.01%
EBIT Next 5Y9.69%
FCF growth 1Y69.95%
FCF growth 3Y-6.79%
FCF growth 5Y1.44%
OCF growth 1Y50.66%
OCF growth 3Y-8.52%
OCF growth 5Y-1.79%