INTL BUSINESS MACHINES CORP (IBM) Stock Fundamental Analysis
USA - New York Stock Exchange - NYSE:IBM - US4592001014 - Common Stock
294.16 USD
+0.3 (+0.1%)
316.65 USD
+22.49 (+7.65%)
We assign a fundamental rating of 4 out of 10 to IBM. IBM was compared to 88 industry peers in the IT Services industry. IBM scores excellent on profitability, 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
- In the past year IBM was profitable.
- IBM had a positive operating cash flow in the past year.
- Each year in the past 5 years IBM has been profitable.
- Each year in the past 5 years IBM had a positive operating cash flow.
1.2 Ratios
- With a decent Return On Assets value of 5.40%, IBM is doing good in the industry, outperforming 69.32% of the companies in the same industry.
- IBM has a Return On Equity of 28.34%. This is amongst the best in the industry. IBM outperforms 88.64% of its industry peers.
- IBM has a Return On Invested Capital of 8.07%. This is in the better half of the industry: IBM outperforms 70.45% of its industry peers.
- IBM had an Average Return On Invested Capital over the past 3 years of 7.07%. This 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.
- In the last couple of years the Profit Margin of IBM has declined.
- 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.
- IBM's Operating Margin has been stable in the last couple of years.
- Looking at the Gross Margin, with a value of 57.81%, IBM is in the better half of the industry, outperforming 79.55% of the companies in the same industry.
- 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.
- IBM has more shares outstanding than it did 1 year ago.
- The number of shares outstanding for IBM has been increased compared to 5 years ago.
- IBM has a better debt/assets ratio than last year.
2.2 Solvency
- An Altman-Z score of 3.51 indicates that IBM is not in any danger for bankruptcy at the moment.
- IBM has a Altman-Z score (3.51) which is comparable to the rest of the industry.
- 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.
- IBM's Debt to Equity ratio of 1.98 is on the low side compared to the rest of the industry. IBM is outperformed by 73.86% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 1.98 | ||
| Debt/FCF | 5.27 | ||
| Altman-Z | 3.51 |
ROIC/WACC0.9
WACC8.93%
2.3 Liquidity
- A Current Ratio of 0.93 indicates that IBM may have some problems paying its short term obligations.
- Looking at the Current ratio, with a value of 0.93, IBM is doing worse than 80.68% of the companies in the same industry.
- A Quick Ratio of 0.89 indicates that IBM may have some problems paying its short term obligations.
- IBM's Quick ratio of 0.89 is on the low side compared to the rest of the industry. IBM is outperformed by 81.82% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 0.93 | ||
| Quick Ratio | 0.89 |
3. Growth
3.1 Past
- IBM shows a small growth in Earnings Per Share. In the last year, the EPS has grown by 6.71%.
- IBM shows a decrease in Earnings Per Share. Measured over the last years, the EPS has been decreasing by -4.21% yearly.
- IBM shows a small growth in Revenue. In the last year, the Revenue has grown by 4.51%.
- The Revenue has been growing slightly by 1.69% on average over the past years.
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%
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
- Based on the Price/Earnings ratio of 26.81, the valuation of IBM can be described as expensive.
- IBM's Price/Earnings ratio is in line with the industry average.
- IBM's Price/Earnings ratio indicates a similar valuation than the S&P500 average which is at 28.60.
- Based on the Price/Forward Earnings ratio of 23.88, the valuation of IBM can be described as rather expensive.
- The rest of the industry has a similar Price/Forward Earnings ratio as IBM.
- When comparing the Price/Forward Earnings ratio of IBM to the average of the S&P500 Index (25.83), we can say IBM is valued inline with the index average.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 26.81 | ||
| Fwd PE | 23.88 |
4.2 Price Multiples
- The rest of the industry has a similar Enterprise Value to EBITDA ratio as IBM.
- The rest of the industry has a similar Price/Free Cash Flow ratio as IBM.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 22.97 | ||
| EV/EBITDA | 20.83 |
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.
- The decent profitability rating of IBM may justify a higher PE ratio.
PEG (NY)2.44
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%. Purely for dividend investing, there may be better candidates out there.
- Compared to an average industry Dividend Yield of 0.44, 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 | 2.28% |
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
- 78.75% of the earnings are spent on dividend by IBM. 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 2Y9.2%
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 2 / 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 26.81 and the Price/Book (PB) ratio is 9.85.
Can you provide the financial health for IBM stock?
The financial health rating of INTL BUSINESS MACHINES CORP (IBM) is 2 / 10.