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 4 out of 10. We evaluated IBM against 81 industry peers in the IT Services industry. There are concerns on the financial health of IBM while its profitability can be described as average. While showing a medium growth rate, IBM is valued expensive at the moment.
1. Profitability
1.1 Basic Checks
In the past year IBM was profitable.
IBM had a positive operating cash flow in the past year.
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
IBM has a Return On Assets (3.76%) which is comparable to the rest of the industry.
IBM has a Return On Equity of 20.36%. This is amongst the best in the industry. IBM outperforms 82.72% of its industry peers.
IBM has a better Return On Invested Capital (7.22%) than 61.73% of its industry peers.
IBM had an Average Return On Invested Capital over the past 3 years of 7.26%. This is significantly below the industry average of 21.85%.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 3.76% | ||
| ROE | 20.36% | ||
| ROIC | 7.22% |
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
IBM has a Profit Margin of 8.71%. This is in the better half of the industry: IBM outperforms 76.54% of its industry peers.
In the last couple of years the Profit Margin of IBM has declined.
IBM's Operating Margin of 14.89% is amongst the best of the industry. IBM outperforms 80.25% of its industry peers.
IBM's Operating Margin has improved in the last couple of years.
IBM has a Gross Margin of 57.04%. This is in the better half of the industry: IBM outperforms 76.54% of its industry peers.
IBM's Gross Margin has been stable in the last couple of years.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 14.89% | ||
| PM (TTM) | 8.71% | ||
| GM | 57.04% |
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
The Return on Invested Capital (ROIC) is below the Cost of Capital (WACC), so IBM is destroying value.
Compared to 1 year ago, IBM has more shares outstanding
The number of shares outstanding for IBM has been increased compared to 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 3.45 indicates that IBM is not in any danger for bankruptcy at the moment.
With a Altman-Z score value of 3.45, IBM perfoms like the industry average, outperforming 56.79% of the companies in the same industry.
IBM has a debt to FCF ratio of 5.06. This is a neutral value as IBM would need 5.06 years to pay back of all of its debts.
IBM's Debt to FCF ratio of 5.06 is in line compared to the rest of the industry. IBM outperforms 56.79% of its industry peers.
A Debt/Equity ratio of 2.10 is on the high side and indicates that IBM has dependencies on debt financing.
IBM has a Debt to Equity ratio of 2.10. This is amonst the worse of the industry: IBM underperforms 81.48% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 2.1 | ||
| Debt/FCF | 5.06 | ||
| Altman-Z | 3.45 |
ROIC/WACC0.79
WACC9.11%
2.3 Liquidity
IBM has a Current 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 Current ratio (1.01) than 79.01% of its industry peers.
IBM has a Quick Ratio of 1.01. This is a bad value and indicates that IBM is not financially healthy enough and could expect problems in meeting its short term obligations.
IBM has a worse Quick ratio (0.97) than 77.78% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.01 | ||
| Quick Ratio | 0.97 |
3. Growth
3.1 Past
The Earnings Per Share has been growing slightly by 3.22% over the past year.
IBM shows a decrease in Earnings Per Share. Measured over the last years, the EPS has been decreasing by -4.21% yearly.
Looking at the last year, IBM shows a small growth in Revenue. The Revenue has grown by 1.23% in the last year.
Measured over the past years, IBM shows a small growth in Revenue. The Revenue has been growing by 1.69% on average per year.
EPS 1Y (TTM)3.22%
EPS 3Y1.19%
EPS 5Y-4.21%
EPS Q2Q%-4.76%
Revenue 1Y (TTM)1.23%
Revenue growth 3Y3.05%
Revenue growth 5Y1.69%
Sales Q2Q%0.55%
3.2 Future
Based on estimates for the next years, IBM will show a small growth in Earnings Per Share. The EPS will grow by 6.40% on average per year.
IBM is expected to show a small growth in Revenue. In the coming years, the Revenue will grow by 4.75% yearly.
EPS Next Y6.83%
EPS Next 2Y6.59%
EPS Next 3Y6.29%
EPS Next 5Y6.4%
Revenue Next Year5.51%
Revenue Next 2Y4.94%
Revenue Next 3Y4.74%
Revenue Next 5Y4.75%
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 28.76, which means the current valuation is very expensive for IBM.
IBM's Price/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/Earnings ratio to 27.15, which is the current average of the S&P500 Index.
A Price/Forward Earnings ratio of 25.12 indicates a quite expensive valuation of IBM.
IBM's Price/Forward Earnings is on the same level as the industry average.
IBM is valuated at similar levels of the S&P average when we compare the Price/Forward Earnings ratio to 21.60, which is the current average of the S&P500 Index.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 28.76 | ||
| Fwd PE | 25.12 |
4.2 Price Multiples
Compared to the rest of the industry, the Enterprise Value to EBITDA ratio of IBM is on the same level as its industry peers.
64.20% of the companies in the same industry are more expensive than IBM, based on the Price/Free Cash Flow ratio.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 21.92 | ||
| EV/EBITDA | 21.94 |
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)4.21
PEG (5Y)N/A
EPS Next 2Y6.59%
EPS Next 3Y6.29%
5. Dividend
5.1 Amount
With a Yearly Dividend Yield of 2.30%, IBM has a reasonable but not impressive dividend return.
IBM's Dividend Yield is rather good when compared to the industry average which is at 2.60. IBM pays more dividend than 92.59% of the companies in the same industry.
IBM's Dividend Yield is comparable with the S&P500 average which is at 2.42.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.3% |
5.2 History
The dividend of IBM has a limited annual growth rate of 0.83%.
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)0.83%
Div Incr Years2
Div Non Decr Years2
5.3 Sustainability
IBM pays out 112.79% of its income as dividend. This is not a sustainable payout ratio.
The dividend of IBM is growing, but earnings are growing more, so the dividend growth is sustainable.
DP112.79%
EPS Next 2Y6.59%
EPS Next 3Y6.29%
294.78
+5.08 (+1.75%)
Chartmill FA Rating
GICS SectorInformation Technology
GICS IndustryGroupSoftware & Services
GICS IndustryIT Services
Earnings (Last)
Earnings (Next)
Inst Owners65.15%
Inst Owner Change2.25%
Ins Owners0.09%
Ins Owner Change6.14%
Market Cap273.97B
Analysts72.59
Price Target259.9 (-11.83%)
Short Float %2.13%
Short Ratio4.44
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.3% |
Yearly Dividend6.68
Dividend Growth(5Y)0.83%
DP112.79%
Div Incr Years2
Div Non Decr Years2
Ex-Date
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)8.28%
Min EPS beat(2)3.59%
Max EPS beat(2)12.97%
EPS beat(4)4
Avg EPS beat(4)7.09%
Min EPS beat(4)2.27%
Max EPS beat(4)12.97%
EPS beat(8)8
Avg EPS beat(8)5.47%
EPS beat(12)11
Avg EPS beat(12)4.29%
EPS beat(16)14
Avg EPS beat(16)3.31%
Revenue beat(2)1
Avg Revenue beat(2)-0.46%
Min Revenue beat(2)-0.93%
Max Revenue beat(2)0.01%
Revenue beat(4)1
Avg Revenue beat(4)-0.65%
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)4
Avg Revenue beat(12)-0.27%
Revenue beat(16)6
Avg Revenue beat(16)-2.96%
PT rev (1m)1.93%
PT rev (3m)0.7%
EPS NQ rev (1m)-0.02%
EPS NQ rev (3m)1.21%
EPS NY rev (1m)-0.04%
EPS NY rev (3m)1.94%
Revenue NQ rev (1m)0%
Revenue NQ rev (3m)2.36%
Revenue NY rev (1m)0.17%
Revenue NY rev (3m)1.89%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 28.76 | ||
| Fwd PE | 25.12 | ||
| P/S | 4.36 | ||
| P/FCF | 21.92 | ||
| P/OCF | 20.07 | ||
| P/B | 10.19 | ||
| P/tB | N/A | ||
| EV/EBITDA | 21.94 |
EPS(TTM)10.25
EY3.48%
EPS(NY)11.74
Fwd EY3.98%
FCF(TTM)13.45
FCFY4.56%
OCF(TTM)14.68
OCFY4.98%
SpS67.6
BVpS28.92
TBVpS-55.49
PEG (NY)4.21
PEG (5Y)N/A
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 3.76% | ||
| ROE | 20.36% | ||
| ROCE | 8.46% | ||
| ROIC | 7.22% | ||
| ROICexc | 8.58% | ||
| ROICexgc | 54.54% | ||
| OM | 14.89% | ||
| PM (TTM) | 8.71% | ||
| GM | 57.04% | ||
| FCFM | 19.89% |
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-Score5
Asset Turnover0.43
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 2.1 | ||
| Debt/FCF | 5.06 | ||
| Debt/EBITDA | 4.01 | ||
| Cap/Depr | 24.38% | ||
| Cap/Sales | 1.83% | ||
| Interest Coverage | 250 | ||
| Cash Conversion | 97.03% | ||
| Profit Quality | 228.33% | ||
| Current Ratio | 1.01 | ||
| Quick Ratio | 0.97 | ||
| Altman-Z | 3.45 |
F-Score5
WACC9.11%
ROIC/WACC0.79
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)3.22%
EPS 3Y1.19%
EPS 5Y-4.21%
EPS Q2Q%-4.76%
EPS Next Y6.83%
EPS Next 2Y6.59%
EPS Next 3Y6.29%
EPS Next 5Y6.4%
Revenue 1Y (TTM)1.23%
Revenue growth 3Y3.05%
Revenue growth 5Y1.69%
Sales Q2Q%0.55%
Revenue Next Year5.51%
Revenue Next 2Y4.94%
Revenue Next 3Y4.74%
Revenue Next 5Y4.75%
EBIT growth 1Y5.13%
EBIT growth 3Y16.81%
EBIT growth 5Y3.49%
EBIT Next Year59.42%
EBIT Next 3Y21.07%
EBIT Next 5Y10.85%
FCF growth 1Y39.31%
FCF growth 3Y7.1%
FCF growth 5Y0.76%
OCF growth 1Y24.5%
OCF growth 3Y1.67%
OCF growth 5Y-1.86%