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. 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.
In the past year IBM had a positive cash flow from operations.
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 3.76% is in line compared to the rest of the industry. IBM outperforms 59.76% of its industry peers.
IBM has a Return On Equity of 20.36%. This is amongst the best in the industry. IBM outperforms 82.93% of its industry peers.
IBM has a better Return On Invested Capital (7.22%) than 62.20% 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 21.60%.
| 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
Looking at the Profit Margin, with a value of 8.71%, IBM is in the better half of the industry, outperforming 76.83% of the companies in the same industry.
IBM's Profit Margin has declined in the last couple of years.
With an excellent Operating Margin value of 14.89%, IBM belongs to the best of the industry, outperforming 80.49% of the companies in the same industry.
IBM's Operating Margin has improved in the last couple of years.
IBM's Gross Margin of 57.04% is fine compared to the rest of the industry. IBM outperforms 76.83% 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
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.
Compared to 5 years ago, IBM has more shares outstanding
Compared to 1 year ago, IBM has an improved debt to assets ratio.
2.2 Solvency
An Altman-Z score of 3.43 indicates that IBM is not in any danger for bankruptcy at the moment.
With a Altman-Z score value of 3.43, IBM perfoms like the industry average, outperforming 56.10% of the companies in the same industry.
The Debt to FCF ratio of IBM is 5.06, which is a neutral value as it means it would take IBM, 5.06 years of fcf income to pay off all of its debts.
With a Debt to FCF ratio value of 5.06, IBM perfoms like the industry average, outperforming 56.10% of the companies in the same industry.
IBM has a Debt/Equity ratio of 2.10. This is a high value indicating a heavy dependency on external financing.
IBM's Debt to Equity ratio of 2.10 is on the low side compared to the rest of the industry. IBM is outperformed by 81.71% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 2.1 | ||
| Debt/FCF | 5.06 | ||
| Altman-Z | 3.43 |
ROIC/WACC0.79
WACC9.18%
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's Current ratio of 1.01 is on the low side compared to the rest of the industry. IBM is outperformed by 79.27% 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 78.05% 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.
The Earnings Per Share has been decreasing by -4.21% on average over the past years.
Looking at the last year, IBM shows a small growth in Revenue. The Revenue has grown by 1.23% in the last year.
The Revenue has been growing slightly by 1.69% on average over the past years.
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
The Earnings Per Share is expected to grow by 6.40% on average over the next years.
IBM is expected to show a small growth in Revenue. In the coming years, the Revenue will grow by 4.75% yearly.
EPS Next Y6.58%
EPS Next 2Y6.55%
EPS Next 3Y6.37%
EPS Next 5Y6.4%
Revenue Next Year5.48%
Revenue Next 2Y4.98%
Revenue Next 3Y4.82%
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.
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
A Price/Earnings ratio of 27.69 indicates a quite expensive valuation of IBM.
IBM's Price/Earnings ratio is in line with the industry average.
Compared to an average S&P500 Price/Earnings ratio of 27.51, IBM is valued at the same level.
Based on the Price/Forward Earnings ratio of 24.20, the valuation of IBM can be described as rather expensive.
IBM's Price/Forward Earnings is on the same level as the industry average.
When comparing the Price/Forward Earnings ratio of IBM to the average of the S&P500 Index (35.58), we can say IBM is valued slightly cheaper.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 27.69 | ||
| Fwd PE | 24.2 |
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 63.41% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 21.1 | ||
| EV/EBITDA | 21.55 |
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 2Y6.55%
EPS Next 3Y6.37%
5. Dividend
5.1 Amount
IBM has a Yearly Dividend Yield of 2.34%.
Compared to an average industry Dividend Yield of 2.45, IBM pays a better dividend. On top of this IBM pays more dividend than 95.12% of the companies listed in the same industry.
Compared to an average S&P500 Dividend Yield of 2.35, IBM has a dividend comparable with the average S&P500 company.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.34% |
5.2 History
The dividend of IBM has a limited annual growth rate of 0.83%.
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)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 2Y6.55%
EPS Next 3Y6.37%
283.79
+0.2 (+0.07%)
Chartmill FA Rating
GICS SectorInformation Technology
GICS IndustryGroupSoftware & Services
GICS IndustryIT Services
Earnings (Last)
Earnings (Next)
Inst Owners65.15%
Inst Owner Change0%
Ins Owners0.09%
Ins Owner Change6.22%
Market Cap263.75B
Analysts72.59
Price Target259.9 (-8.42%)
Short Float %2.08%
Short Ratio5.31
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.34% |
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)1.73%
PT rev (3m)0.81%
EPS NQ rev (1m)-0.04%
EPS NQ rev (3m)1.23%
EPS NY rev (1m)-0.27%
EPS NY rev (3m)1.7%
Revenue NQ rev (1m)-0.01%
Revenue NQ rev (3m)2.28%
Revenue NY rev (1m)0.14%
Revenue NY rev (3m)1.95%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 27.69 | ||
| Fwd PE | 24.2 | ||
| P/S | 4.2 | ||
| P/FCF | 21.1 | ||
| P/OCF | 19.33 | ||
| P/B | 9.81 | ||
| P/tB | N/A | ||
| EV/EBITDA | 21.55 |
EPS(TTM)10.25
EY3.61%
EPS(NY)11.73
Fwd EY4.13%
FCF(TTM)13.45
FCFY4.74%
OCF(TTM)14.68
OCFY5.17%
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 | 3.43 |
F-Score5
WACC9.18%
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 Y6.58%
EPS Next 2Y6.55%
EPS Next 3Y6.37%
EPS Next 5Y6.4%
Revenue 1Y (TTM)1.23%
Revenue growth 3Y3.05%
Revenue growth 5Y1.69%
Sales Q2Q%0.55%
Revenue Next Year5.48%
Revenue Next 2Y4.98%
Revenue Next 3Y4.82%
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%