INTL BUSINESS MACHINES CORP (IBM) Stock Fundamental Analysis
NYSE:IBM - New York Stock Exchange, Inc. - US4592001014 - Common Stock - Currency: USD
IBM gets a fundamental rating of 4 out of 10. The analysis compared the fundamentals against 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 valied quite expensively at the moment, while 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.
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
IBM has a Return On Assets (3.76%) which is in line with 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.
The Return On Invested Capital of IBM (7.22%) is better 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 22.63%.
| 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
With a decent Profit Margin value of 8.71%, IBM is doing good in the industry, outperforming 74.39% of the companies in the same industry.
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 80.49% of its industry peers.
In the last couple of years the Operating Margin of IBM has grown nicely.
Looking at the Gross Margin, with a value of 57.04%, IBM is in the better half of the industry, outperforming 76.83% 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 | 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.
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
An Altman-Z score of 3.35 indicates that IBM is not in any danger for bankruptcy at the moment.
With a Altman-Z score value of 3.35, IBM perfoms like the industry average, outperforming 58.54% 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.
Looking at the Debt to FCF ratio, with a value of 5.06, IBM is in line with its industry, outperforming 52.44% 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 has a worse Debt to Equity ratio (2.10) than 78.05% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 2.1 | ||
| Debt/FCF | 5.06 | ||
| Altman-Z | 3.35 |
ROIC/WACC0.77
WACC9.33%
2.3 Liquidity
A Current Ratio of 1.01 indicates that IBM should not have too much problems paying its short term obligations.
IBM has a Current ratio of 1.01. This is in the lower half of the industry: IBM underperforms 78.05% of its industry peers.
A Quick Ratio of 0.97 indicates that IBM may have some problems paying its short term obligations.
IBM has a worse Quick ratio (0.97) than 76.83% 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.
IBM shows a small growth in Revenue. In the last year, the Revenue has grown by 1.23%.
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
Based on estimates for the next years, IBM will show a small growth in Earnings Per Share. The EPS will grow by 7.16% on average per year.
IBM is expected to show a small growth in Revenue. In the coming years, the Revenue will grow by 4.68% yearly.
EPS Next Y6.87%
EPS Next 2Y6.4%
EPS Next 3Y6.27%
EPS Next 5Y7.16%
Revenue Next Year5.33%
Revenue Next 2Y4.83%
Revenue Next 3Y4.61%
Revenue Next 5Y4.68%
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
A Price/Earnings ratio of 26.04 indicates a quite expensive valuation of IBM.
IBM's Price/Earnings is on the same level as the industry average.
IBM's Price/Earnings ratio indicates a similar valuation than the S&P500 average which is at 26.60.
With a Price/Forward Earnings ratio of 22.83, IBM is valued on the expensive side.
60.98% of the companies in the same industry are more expensive than IBM, based on the Price/Forward Earnings ratio.
IBM's Price/Forward Earnings ratio indicates a similar valuation than the S&P500 average which is at 22.43.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 26.04 | ||
| Fwd PE | 22.83 |
4.2 Price Multiples
The rest of the industry has a similar Enterprise Value to EBITDA ratio as IBM.
Based on the Price/Free Cash Flow ratio, IBM is valued a bit cheaper than 68.29% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 19.85 | ||
| EV/EBITDA | 20.54 |
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)3.79
PEG (5Y)N/A
EPS Next 2Y6.4%
EPS Next 3Y6.27%
5. Dividend
5.1 Amount
With a Yearly Dividend Yield of 2.52%, IBM has a reasonable but not impressive dividend return.
Compared to an average industry Dividend Yield of 2.35, IBM pays a better dividend. On top of this IBM pays more dividend than 96.34% of the companies listed in the same industry.
Compared to an average S&P500 Dividend Yield of 2.36, IBM has a dividend comparable with the average S&P500 company.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.52% |
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
112.79% of the earnings are spent on dividend by IBM. 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%
266.95
-1.46 (-0.54%)
Chartmill FA Rating
GICS SectorInformation Technology
GICS IndustryGroupSoftware & Services
GICS IndustryIT Services
Earnings (Last)
Earnings (Next)
Inst Owners64.25%
Inst Owner Change2.16%
Ins Owners0.09%
Ins Owner Change5.65%
Market Cap248.10B
Analysts72.59
Price Target254.97 (-4.49%)
Short Float %2.21%
Short Ratio4.09
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.52% |
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)-1.1%
PT rev (3m)14.38%
EPS NQ rev (1m)1.29%
EPS NQ rev (3m)1.07%
EPS NY rev (1m)2.11%
EPS NY rev (3m)1.93%
Revenue NQ rev (1m)2.29%
Revenue NQ rev (3m)2.36%
Revenue NY rev (1m)1.8%
Revenue NY rev (3m)1.76%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 26.04 | ||
| Fwd PE | 22.83 | ||
| P/S | 3.95 | ||
| P/FCF | 19.85 | ||
| P/OCF | 18.18 | ||
| P/B | 9.23 | ||
| P/tB | N/A | ||
| EV/EBITDA | 20.54 |
EPS(TTM)10.25
EY3.84%
EPS(NY)11.69
Fwd EY4.38%
FCF(TTM)13.45
FCFY5.04%
OCF(TTM)14.68
OCFY5.5%
SpS67.6
BVpS28.92
TBVpS-55.49
PEG (NY)3.79
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 | 3.35 |
F-Score5
WACC9.33%
ROIC/WACC0.77
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 5Y7.16%
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 5Y4.68%
EBIT growth 1Y5.13%
EBIT growth 3Y16.81%
EBIT growth 5Y3.49%
EBIT Next Year53.02%
EBIT Next 3Y20.05%
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%