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%)
IBM gets a fundamental rating of 4 out of 10. The analysis compared the fundamentals against 88 industry peers in the IT Services industry. IBM scores excellent on profitability, but there are concerns on its financial health. IBM is quite expensive at the moment. It does show a decent growth rate.
1. Profitability
1.1 Basic Checks
- IBM had positive earnings in the past year.
- IBM had a positive operating cash flow in the past year.
- In the past 5 years IBM has always been profitable.
- IBM had a positive operating cash flow in each of the past 5 years.
1.2 Ratios
- IBM's Return On Assets of 5.40% is fine compared to the rest of the industry. IBM outperforms 69.32% of its industry peers.
- IBM has a better Return On Equity (28.34%) than 88.64% of its industry peers.
- IBM's Return On Invested Capital of 8.07% is fine compared to the rest of the industry. IBM outperforms 70.45% of its industry peers.
- Measured over the past 3 years, the Average Return On Invested Capital for IBM is significantly below the industry average of 29.06%.
- The 3 year average ROIC (7.07%) for IBM is below the current ROIC(8.07%), indicating increased profibility in the last year.
| 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.
- Looking at the Operating Margin, with a value of 16.06%, IBM belongs to the top of the industry, outperforming 84.09% of the companies in the same industry.
- In the last couple of years the Operating Margin of IBM has remained more or less at the same level.
- With a decent Gross Margin value of 57.81%, IBM is doing good in the industry, outperforming 79.55% 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 | 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
- With a Return on Invested Capital (ROIC) below the Cost of Capital (WACC), 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
- IBM has an Altman-Z score of 3.51. This indicates that IBM is financially healthy and has little risk of bankruptcy at the moment.
- IBM's Altman-Z score of 3.51 is in line compared to the rest of the industry. IBM outperforms 57.95% of its industry peers.
- The Debt to FCF ratio of IBM is 5.27, which is a neutral value as it means it would take IBM, 5.27 years of fcf income to pay off all of its debts.
- Looking at the Debt to FCF ratio, with a value of 5.27, IBM is in line with its industry, outperforming 52.27% of the companies in the same industry.
- 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 | 3.51 |
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.
- IBM has a Current ratio of 0.93. This is amonst the worse of the industry: IBM underperforms 80.68% of its industry peers.
- 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.
- IBM has a Quick ratio of 0.89. This is amonst the worse of the industry: IBM underperforms 81.82% of its industry peers.
| 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.
- Measured over the past years, IBM shows a decrease in Earnings Per Share. The EPS has been decreasing by -4.21% on average per year.
- IBM shows a small growth in Revenue. In the last year, the Revenue has grown by 4.51%.
- 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
- Based on estimates for the next years, IBM will show a small growth in Earnings Per Share. The EPS will grow by 6.07% on average per year.
- The Revenue is expected to grow by 5.12% on average over the next years.
EPS Next Y11.1%
EPS Next 2Y9.19%
EPS Next 3Y8.11%
EPS Next 5Y6.07%
Revenue Next Year6.82%
Revenue Next 2Y5.75%
Revenue Next 3Y5.24%
Revenue Next 5Y5.12%
3.3 Evolution
- The EPS growth rate is accelerating: in the next years the growth will be better than in the last years.
- 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
- With a Price/Earnings ratio of 26.66, IBM can be considered very expensive at the moment.
- Compared to the rest of the industry, the Price/Earnings ratio of IBM is on the same level as its industry peers.
- The average S&P500 Price/Earnings ratio is at 27.21. IBM is around the same levels.
- The Price/Forward Earnings ratio is 23.74, which indicates a rather expensive current valuation of IBM.
- The rest of the industry has a similar Price/Forward Earnings ratio as IBM.
- IBM is valuated at similar levels of the S&P average when we compare the Price/Forward Earnings ratio to 24.26, 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.
- IBM's Price/Free Cash Flow ratio is a bit cheaper when compared to the industry. IBM is cheaper than 60.23% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 22.83 | ||
| EV/EBITDA | 20.88 |
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)2.4
PEG (5Y)N/A
EPS Next 2Y9.19%
EPS Next 3Y8.11%
5. Dividend
5.1 Amount
- IBM has a Yearly Dividend Yield of 2.26%. Purely for dividend investing, there may be better candidates out there.
- Compared to an average industry Dividend Yield of 0.43, IBM pays a better dividend. On top of this IBM pays more dividend than 92.05% of the companies listed in the same industry.
- Compared to an average S&P500 Dividend Yield of 1.82, IBM pays a bit more dividend than the S&P500 average.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.26% |
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.
- The dividend of IBM is growing, but earnings are growing more, so the dividend growth is sustainable.
DP78.75%
EPS Next 2Y9.19%
EPS Next 3Y8.11%
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.