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. There are concerns on the financial health of IBM while its profitability can be described as average. 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.
Each year in the past 5 years IBM has been profitable.
IBM had a positive operating cash flow in each of the past 5 years.
1.2 Ratios
IBM has a Return On Assets (3.76%) which is in line with its industry peers.
With an excellent Return On Equity value of 20.36%, IBM belongs to the best of the industry, outperforming 82.93% of the companies in the same industry.
IBM has a better Return On Invested Capital (7.22%) than 60.98% of its industry peers.
The Average Return On Invested Capital over the past 3 years for IBM 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.
Looking at the Operating Margin, with a value of 14.89%, IBM belongs to the top of the industry, outperforming 80.49% of the companies in the same industry.
In the last couple of years the Operating Margin of IBM has grown nicely.
With a decent Gross Margin value of 57.04%, IBM is doing good in the industry, outperforming 76.83% 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 | 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.
Compared to 1 year ago, IBM has more shares outstanding
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 3.42 indicates that IBM is not in any danger for bankruptcy at the moment.
Looking at the Altman-Z score, with a value of 3.42, IBM is in line with its industry, outperforming 59.76% of the companies in the same industry.
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.
IBM has a Debt to FCF ratio (5.06) which is comparable to the rest of the industry.
A Debt/Equity ratio of 2.10 is on the high side and indicates that IBM has dependencies on debt 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 | 3.42 |
ROIC/WACC0.78
WACC9.31%
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.
The Current ratio of IBM (1.01) is worse than 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 Quick ratio of 0.97. This is in the lower half of the industry: IBM underperforms 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%.
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 6.30% on average per year.
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 27.63, 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 26.34. IBM is around the same levels.
The Price/Forward Earnings ratio is 24.22, which indicates a rather expensive current valuation of IBM.
IBM's Price/Forward Earnings is on the same level as the industry average.
The average S&P500 Price/Forward Earnings ratio is at 22.19. IBM is around the same levels.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 27.63 | ||
| Fwd PE | 24.22 |
4.2 Price Multiples
IBM's Enterprise Value to EBITDA ratio is in line with the industry average.
Based on the Price/Free Cash Flow ratio, IBM is valued a bit cheaper than 62.20% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 21.06 | ||
| EV/EBITDA | 21.51 |
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)4.02
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.
Compared to an average industry Dividend Yield of 2.52, IBM pays a better dividend. On top of this IBM pays more dividend than 96.34% of the companies listed in the same industry.
IBM's Dividend Yield is comparable with the S&P500 average which is at 2.40.
| 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%
283.21
+0.16 (+0.06%)
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 Change6.17%
Market Cap263.22B
Analysts72.59
Price Target255.48 (-9.79%)
Short Float %2.13%
Short Ratio4.44
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)0.2%
PT rev (3m)-1.02%
EPS NQ rev (1m)-0.02%
EPS NQ rev (3m)1.21%
EPS NY rev (1m)0%
EPS NY rev (3m)1.93%
Revenue NQ rev (1m)0%
Revenue NQ rev (3m)2.36%
Revenue NY rev (1m)0%
Revenue NY rev (3m)1.72%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 27.63 | ||
| Fwd PE | 24.22 | ||
| P/S | 4.19 | ||
| P/FCF | 21.06 | ||
| P/OCF | 19.29 | ||
| P/B | 9.79 | ||
| P/tB | N/A | ||
| EV/EBITDA | 21.51 |
EPS(TTM)10.25
EY3.62%
EPS(NY)11.69
Fwd EY4.13%
FCF(TTM)13.45
FCFY4.75%
OCF(TTM)14.68
OCFY5.19%
SpS67.6
BVpS28.92
TBVpS-55.49
PEG (NY)4.02
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 | 3.42 |
F-Score5
WACC9.31%
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%