IBM Stock Analysis, Valuation (NYSE:IBM)

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$153.96 $1.2 (0.77%) IBM stock closing price Feb 21, 2018 (Closing)
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IBM
Updated on : Feb 21, 2018
previous close
IBM 154 (0%)
NASDAQ 7218.2 (0%)
Closing Price On: Feb 21, 2018
stock rating
RATING: ★★★★★★★★★★ (0/5)
Industry :
Computer-Integrated Systems
Sector :
Computer and Technology
5 Quarter Revenue
Revenue Growth
2017-Q4
$billion
%
YOY GROWTH
Compared to the industry
Long Term Growth
5 Year CAGR:
-5.4%
Operating Profit
Operating Margin:
13.1%
Sector Average:
5.3%
5 Quarter Net Profit
Net Margins
2017-Q4
%
LTM Margin
Compared to the industry
Debt/Equity Ratio
Debt:
46.82B
Debt/Equity Ratio:
 2.64
Compared to the industry
Dividend Yield
IBM dividend yield:
3.83%
PROS      CONS
Operating Margins
Net Margins
ROIC
ROE
PE Valuation
PS Valuation
Recent Growth
Long Term Growth
High Debt Burden
Rating: ★★★★★★★★★★ (0/5)
Relative Valuation
IBM PS :
1.8
Industry PS :
2.8
Sector:   Computer and Technology.   *PE adjusted for one time items.
Other Metrics
Return on Invested Capital:
6.8%
Return on Equity:
31%
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IBM Stock Analysis

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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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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 3.6/5

Should you buy IBM stock?

  • IBM had a healthy average operating margin of 13.1% over the last 4 quarters.
  • LTM Net margins were good at 7.3% for IBM.
  • IBM stock is trading at an earnings multiple of 11.1 which is better than the industry average of 25.3.
  • When compared with the Computer-Integrated Systems industry average PS ratio of 2.8, the price-to-sales ratio of 1.8 for IBM stock is attractive.
  • IBM's return on invested capital of 6.8% is good.
  • Return On Equity (ROE) which is a measure of the company's profitability, looks great for IBM at 31%.

Should you sell IBM stock?

  • IBM salesgrew by a marginal 3.6% year over year in 2017 Q4.
  • Revenue declined at a CAGR of -5.4% over the last 5 years.
  • IBM has a debt/equity ratio of  2.64, which is worse than the average in the Computer and Technology sector.

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.