International Business Machines Stock Analysis (NYSE:IBM)

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$167.34 $0.61 (0.36%) IBM stock closing price Jan 13, 2017 (Closing)
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International Business Machines
Updated on : Jan 13, 2017
previous close
IBM 167.3 (0%)
NASDAQ 5574.1 (0%)
Closing Price On: Jan 13, 2017
stock rating
RATING: ★★★★★★★★★★ (0/5)
Industry :
Computer-Integrated Systems
Sector :
Computer and Technology
5 Quarter Revenue
Revenue Growth
2016-Q3
$billion
%
YOY GROWTH
Compared to the industry
Long Term Growth
5 Year CAGR:
-5.5%
Operating Profit
Operating Margin:
14.8%
Sector Average:
4.8%
5 Quarter Net Profit
Net Margins
2016-Q3
%
LTM Margin
Compared to the industry
Debt/Equity Ratio
Debt:
42.48B
Debt/Equity Ratio:
 2.48
Compared to the industry
Cash Flow
Operating cash flow:
$4.21B
Net Income:
$2.85B
Dividend Yield
IBM dividend yield:
3.23%
PROS      CONS
Operating Margins
Net Margins
ROIC
ROE
FCF Margin
PE Valuation
Recent Growth
Long Term Growth
High Debt Burden
Rating: ★★★★★★★★★★ (0/5)
Relative Valuation
IBM PS :
2
Industry PS :
2.4
Sector:   Computer and Technology.   *PE adjusted for one time items.
Other Metrics
Return on Invested Capital:
15.7%
Return on Equity:
77.9%
Free Cash Flow Margin:
18.2%
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International Business Machines Analysis Video

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In our IBM stock analysis we look at the financial aspect of the business. However any analysis within the technology space needs to look at how the tech space is changing for the business itself. IBM industry analysis shows that the firm is facing increasing pressure from new competitors. The biggest competition is faced within GBS and GTS division which together contributes a major part of IBM revenue.

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International Business Machines Corp. Stock Rating (3.6/5)

Should you buy IBM stock?

  • The TTM operating margin was good at 14.8% for International Business Machines.
  • Net margins stood at a healthy 14.8% (average) for International Business Machines in the Trailing Twelve Months.
  • IBM stock is trading at an earnings multiple of 12.5 which is better than the industry average of 26.
  • International Business Machines's return on invested capital of 15.7% is good.
  • Return On Equity (ROE) which is a measure of the company's profitability, looks great for International Business Machines at 77.9%.
  • The company has a good Free Cash Flow (FCF) margin of 18.2%.

Should you sell IBM stock?

  • International Business Machines sales declined by -0.3% year on year in 2016 Q3.
  • Sales declined by annually over the last 5 years.
  • International Business Machines is debt laden and has a high debt/equity ratio of  2.48.

Comments on this video and International Business Machines stock

IBM stock history shows a constant bullish trend in the last decade which finally ended with last quarter results. IBM analysis reveals a huge change in the way technology is used by IBM’s clients. More and more firms are shifting towards cloud computing and are looking for cost saving in their IT budget. This increasing commoditization of IT services will impact IBM the most as it contributes to a majority of its revenues. The firm still has a huge pool of resources to bank on. IBM assets are in excess of $120 billion and IBM company analysis shows that the firm still produces a huge pile of free cash flow.

However these resources must be judiciously used. Financial analysis of IBM reveals that most of the EPS growth was due to share repurchases. Instead of doing this the firm can invest in newer technologies or make better acquisitions. IBM stock analysis in 2013 was mostly swayed by the healthy EPS growth on the back of share repurchases however in depth IBM market analysis shows that the profit margins of the firm are increasingly getting squeezed with few growth verticals. This is the reason why IBM PE ratio chart shows a PE ratio of only 10.5 for a firm which is raking in more than $100 billion in revenues and which invests over $6 billion in R&D.