IBM Stock Analysis, Valuation (NYSE:IBM)

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$145.94 $0.38 (0.26%) IBM stock closing price Apr 25, 2018 (Closing)
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IBM
Updated on : Apr 25, 2018
previous close
IBM 145.9 (0%)
NASDAQ 7003.7 (0%)
Closing Price On: Apr 25, 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:
5.7%
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
Cash Flow
Operating cash flow:
$5.73B
Net Income:
-$1.05B
Dividend Yield
IBM dividend yield:
3.08%
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 :
1.7
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%
Free Cash Flow Margin:
21.7%
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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 3.7/5

Should you buy IBM stock?

  • IBM's average operating margin of 13.1% was exceptional.
  • Net margins came in at average 7.3% for IBM over the last twelve months.
  • The IBM stock currently trades at a price to earnings ratio of 10.5. We rate this as a positive, compared to the industry average of 24.9.
  • IBM stock is trading at a favorable price to sales multiple of 1.7 as against the Computer-Integrated Systems industry average multiple of 2.8.
  • IBM has an attractive ROIC (Return on Invested Capital) of 6.8%
  • The LTM ROE of 31% for IBM is attractive.
  • IBM has a healthy FCF (Free Cash Flow) margin of 21.7%.

Should you sell IBM stock?

  • 2017 Q4 revenue growth of 3.6% YoY was meagre.
  • The company saw an average annual sales decline of -5.4% in sales over the last 5 years.
  • IBM is debt laden and has a high debt/equity ratio of  2.64.

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.