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 4 out of 10 to IBM. IBM was compared to 82 industry peers in the IT Services industry. IBM has a medium profitability rating, but doesn't score so well on its financial health evaluation. IBM is quite expensive at the moment. It does show a decent growth rate.
1. Profitability
1.1 Basic Checks
In the past year IBM was profitable.
IBM had a positive operating cash flow in the past year.
IBM had positive earnings in each of the past 5 years.
In the past 5 years IBM always reported a positive cash flow from operatings.
1.2 Ratios
The Return On Assets of IBM (3.76%) is comparable to the rest of the industry.
Looking at the Return On Equity, with a value of 20.36%, IBM belongs to the top of the industry, outperforming 82.93% of the companies in the same industry.
IBM's Return On Invested Capital of 7.22% is fine compared to the rest of the industry. IBM outperforms 60.98% 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 21.64%.
| 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 better Profit Margin (8.71%) than 76.83% of its industry peers.
IBM's Profit Margin has declined in the last couple of years.
IBM has a better Operating Margin (14.89%) than 80.49% of its industry peers.
IBM's Operating Margin has improved in the last couple of years.
The Gross Margin of IBM (57.04%) is better than 76.83% of its industry peers.
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 | 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
With a Return on Invested Capital (ROIC) below the Cost of Capital (WACC), IBM 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 an improved debt to assets ratio.
2.2 Solvency
An Altman-Z score of 3.41 indicates that IBM is not in any danger for bankruptcy at the moment.
IBM's Altman-Z score of 3.41 is in line compared to the rest of the industry. IBM outperforms 56.10% of its industry peers.
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.
The Debt to FCF ratio of IBM (5.06) is comparable to the rest of the industry.
IBM has a Debt/Equity ratio of 2.10. This is a high value indicating a heavy dependency on external financing.
IBM has a worse Debt to Equity ratio (2.10) than 81.71% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 2.1 | ||
| Debt/FCF | 5.06 | ||
| Altman-Z | 3.41 |
ROIC/WACC0.78
WACC9.25%
2.3 Liquidity
A Current Ratio of 1.01 indicates that IBM should not have too much problems paying its short term obligations.
Looking at the Current ratio, with a value of 1.01, IBM is doing worse than 79.27% of the companies in the same industry.
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 78.05% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.01 | ||
| Quick Ratio | 0.97 |
3. Growth
3.1 Past
IBM shows a small growth in Earnings Per Share. In the last year, the EPS has grown by 3.22%.
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.
The Revenue has been growing slightly by 1.23% in the past year.
IBM shows a small growth in Revenue. Measured over the last years, the Revenue has been growing by 1.69% yearly.
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
IBM is expected to show a small growth in Earnings Per Share. In the coming years, the EPS will grow by 6.30% yearly.
Based on estimates for the next years, IBM will show a small growth in Revenue. The Revenue will grow by 4.69% on average per year.
EPS Next Y6.87%
EPS Next 2Y6.4%
EPS Next 3Y6.27%
EPS Next 5Y6.3%
Revenue Next Year5.33%
Revenue Next 2Y4.83%
Revenue Next 3Y4.61%
Revenue Next 5Y4.69%
3.3 Evolution
The EPS growth rate is accelerating: in the next years the growth will be better than in the last years.
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
With a Price/Earnings ratio of 27.05, IBM can be considered very expensive at the moment.
The rest of the industry has a similar Price/Earnings ratio as IBM.
IBM's Price/Earnings ratio indicates a similar valuation than the S&P500 average which is at 26.31.
IBM is valuated rather expensively with a Price/Forward Earnings ratio of 23.71.
Compared to the rest of the industry, the Price/Forward Earnings ratio of IBM is on the same level as its industry peers.
Compared to an average S&P500 Price/Forward Earnings ratio of 22.13, IBM is valued at the same level.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 27.05 | ||
| Fwd PE | 23.71 |
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.
Compared to the rest of the industry, the Price/Free Cash Flow ratio of IBM indicates a somewhat cheap valuation: IBM is cheaper than 65.85% of the companies listed in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 20.61 | ||
| EV/EBITDA | 21.37 |
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)3.94
PEG (5Y)N/A
EPS Next 2Y6.4%
EPS Next 3Y6.27%
5. Dividend
5.1 Amount
With a Yearly Dividend Yield of 2.39%, 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 2.52. IBM pays more dividend than 95.12% of the companies in the same industry.
Compared to an average S&P500 Dividend Yield of 2.39, IBM has a dividend comparable with the average S&P500 company.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.39% |
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.
IBM's earnings are growing more than its dividend. This makes the dividend growth sustainable.
DP112.79%
EPS Next 2Y6.4%
EPS Next 3Y6.27%
277.22
-3.81 (-1.36%)
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 Change5.65%
Market Cap257.65B
Analysts72.59
Price Target255.48 (-7.84%)
Short Float %2.3%
Short Ratio4.5
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.39% |
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)-0.85%
PT rev (3m)-1.02%
EPS NQ rev (1m)-0.02%
EPS NQ rev (3m)1.05%
EPS NY rev (1m)2.11%
EPS NY rev (3m)1.93%
Revenue NQ rev (1m)0%
Revenue NQ rev (3m)2.36%
Revenue NY rev (1m)0.01%
Revenue NY rev (3m)1.72%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 27.05 | ||
| Fwd PE | 23.71 | ||
| P/S | 4.1 | ||
| P/FCF | 20.61 | ||
| P/OCF | 18.88 | ||
| P/B | 9.58 | ||
| P/tB | N/A | ||
| EV/EBITDA | 21.37 |
EPS(TTM)10.25
EY3.7%
EPS(NY)11.69
Fwd EY4.22%
FCF(TTM)13.45
FCFY4.85%
OCF(TTM)14.68
OCFY5.3%
SpS67.6
BVpS28.92
TBVpS-55.49
PEG (NY)3.94
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 | 3.41 |
F-Score5
WACC9.25%
ROIC/WACC0.78
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 Y6.87%
EPS Next 2Y6.4%
EPS Next 3Y6.27%
EPS Next 5Y6.3%
Revenue 1Y (TTM)1.23%
Revenue growth 3Y3.05%
Revenue growth 5Y1.69%
Sales Q2Q%0.55%
Revenue Next Year5.33%
Revenue Next 2Y4.83%
Revenue Next 3Y4.61%
Revenue Next 5Y4.69%
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%