IBM Stock Analysis, Valuation (NYSE:IBM)

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$145.46 $0.44 (0.3%) IBM stock closing price Jul 16, 2018 (Closing)

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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Note: Amigobulls stock rating is our opinion based on the historical performance of the company's fundamentals. It is not indicative of the future performance of the stock.

International Business Machines Corp. Stock Rating 3.7/5

Should you buy IBM stock?

  • IBM had a healthy average operating margin of 13.29 over the last 4 quarters.
  • Net margins came in at average 7.1% for IBM over the last twelve months.
  • The company has an operating cash flow which is 2.7409 times the net income. We see this as a positive signal.
  • IBM stock is trading at an earnings multiple of 10.5 which is better than the sector average of 26.2.
  • IBM stock is trading at a favorable price to sales multiple of 1.7 as against the Computer and Technology sector average multiple of 3.
  • IBM's dividend yield of 4.12 is attractive.
  • IBM has an attractive ROIC (Return on Invested Capital) of 7
  • IBM has a good Return On Equity (ROE) of 30.6.
  • IBM has a healthy FCF (Free Cash Flow) margin of 20.1.

Should you sell IBM stock?

  • IBM had a low YoY revenue growth of 5.1% in the 2018-03.
  • Sales declined by -5 annually over the last 5 years.
  • IBM is debt laden and has a high debt/equity ratio of 2.54.

Comments on this video and IBM 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.