IBM  International Business Machine...

Exchange

NYSE

Sector

Technology

Industry

Computer Manufacturing

Market Cap.

172.03B

Vuru Grade

68.62/100

Current Price

$181.35
-0.30 (-0.17%)

Growth Price

$103.61
Overvalued by 42.87%

Stability Price

$104.94
Overvalued by 42.14%

Company Metrics

  • P/E 14.65
  • P/S 2.16
  • P/B 9.44
  • EPS 12.38
  • Cash ROIC 20.85%
  • Cash Ratio 0.24
  • Dividend 5.6 / 3.09%
  • Avg. Vol. 3.62M
  • Shares 948.61M
  • Market Cap. 172.03B

Company Description

International Business Machines Corporation (IBM) provides information technology (IT) products and services worldwide. Its Global Technology Services segment provides IT infrastructure and business process services, including strategic outsourcing, process, integrated technology, and maintenance services, as well as technology-based support services. The company's Global Business Services segment... more


Download 10 Years of Financial Statements:
Income Statement   Balance Sheet   Cash Flow

News

International Business Machines Corporation's Biggest Win in 2016
Motley Fool - Feb 1, 2017
Call 2016 the year International Business Machines' (NYSE:IBM) Watson Artificial Intelligence (AI) product went from gimmick to practical tool.
International Business Machines Corp (IBM) Closes 0.17% Down on the Day for ...
Equities.com - 22 hours ago
Shares of International Business Machines Corp (IBM) ended the trading day Friday at $181.35, representing a move of -0.17%, or $0.3 per share, on volume of 3.27 million shares.
International Business Machines Corp.(NYSE:IBM) Researchers Introduces Watson ... - Market Exclusive
The International Business Machines Corp. (IBM) Given Hold Rating at the ... - DailyQuint
October 20th Options Now Available For International Business Machines
Nasdaq - Feb 21, 2017
Investors in International Business Machines Corp. (Symbol: IBM) saw new options begin trading today, for the October 20th expiration.
International Business Machines Corp. (IBM), Visa Inc to add secure payment to ...
Market Exclusive - Feb 17, 2017
On Feb. 16, International Business Machines Corp. (NYSE:IBM) and Visa Inc (NYSE:V) announced a partnership to bring the point of sale to connected devices including cars.
IBM – International Business Machines Corporation : IBM, Indiegogo and Arrow ... - The Wall Street Transcript
International Business Machines Corporation (NYSE:IBM) collaborated with Avnet ... - Benchmark Monitor
International Business Machines (IBM) Up 8.3% Since Earnings Report: Can It ...
Nasdaq - Feb 20, 2017
It has been about a month since the last earnings report for International Business Machines Corporation IBM . Shares have added about 8.3% in that time frame, outperforming the market.
EOD Risers: International Business Machines Corp., Intel Corporation, Johnson ...
DirectorsTalk Interviews - Feb 24, 2017
The trading price for International Business Machines Corp. company symbol: (NYSE:IBM) a technology company, moved up 0.28% or 0.5 points throughout yesterday's trading day.
International Business Machines Corp (IBM) Closes 0.14% Down on the Day for ...
Equities.com - Feb 16, 2017
Shares of International Business Machines Corp (IBM) ended the trading day Thursday at $181.43, representing a move of -0.14%, or $0.25 per share, on volume of 3.24 million shares.
Today Analysts Focus on International Business Machines Corporation (IBM), The ... - StockNewsJournal
International Business Machines Corporation (IBM) Stake Held by Shelter Mutual ... - The Cerbat Gem
International Business Machines Corporation (IBM) Ex-Dividend Date Scheduled ...
Nasdaq - Feb 7, 2017
International Business Machines Corporation ( IBM ) will begin trading ex-dividend on February 08, 2017. A cash dividend payment of $1.4 per share is scheduled to be paid on March 10, 2017.
International Business Machines Corp (IBM) Closes 0.5% Down on the Day for ... - Equities.com
The International Business Machines Corp. (IBM) Stock Dip Beckons to Profit ... - Investorplace.com
International Business Machines Corp. Is Back! (IBM)
Investorplace.com - Jan 26, 2017
Working for International Business Machines Corp. (IBM) was the dream of many students in my business school. A job with the world's leading high-tech company was far and away the most popular goal of both the graduate and undergraduate students.
International Business Machines Corporation (IBM) Earns “Neutral” Rating from ... - The Cerbat Gem
What Analysts Report Shows About International Business Machines Corporation ... - Transcript Daily
International Business Machines Corp (IBM) Closes 0.38% Up on the Day for ...
Equities.com - Feb 13, 2017
After opening the trading day at $179.24, shares of International Business Machines Corp traded between a range of $178.84 and $179.90.
Impact of Brokerage Rating on International Business Machines Corporation(IBM) - Highland Mirror
Announcing The Birth Of An 'Amazing Machine' And That 'Nothing Will Ever Stop' IBM - Forbes
Growth Rate Assumed by Market

We did a reverse valuation to calculate the growth rate the market is assuming for IBM to be considered fairly valued at its current market price. It's useful to compare this to the growth rate we're assuming for the Growth Price.

Future Free Cash Flow Growth Rate

This is the annual growth rate we've applied to calculate IBM's Free Cash Flow for the next 10 years. To calculate it, we looked at several time periods of the last 10 years. Feel free to adjust it, but we limit the initial growth rate to 20% and slow it down over the years. Otherwise, long-term sustainability issues come into play.

Discount Rate

The discount rate is the annual rate of return an investor requires to take the risk of investing in a single stock. To account for that risk, this should be above 8-10%, as this is the avg. annual rate of return for the S&P500 over the past 100 years.

$181.35 Current Price

$103.61 Growth Price (DCF)

Overvalued by 42.87%


Growth Rate Assumed by Market: 15.97%


Future Free Cash Flow Growth Rate: 0.4%


Discount Rate: 15.0%


Show Free Cash Flow numbers

$104.94 Stability Price (EPV)

Overvalued by 42.14%


Discount Rate: 15.0%

$137.42 Book Price

Overvalued by 24.22%


Excellent Cash Return on Invested Capital over the past 5 years

IBM has efficiently invested its financial resources in buildings, projects, and equipment, resulting in strong returns. Annual Reports can be useful in identifying the cause of one-time events and future sustainability.

IBM has created $20.85 of cash for every $100 invested.
Figures in USD. Fiscal year ends in December
20112012201320142015
Free Cash Flow 15.74B 15.50B 13.35B 12.69B 12.86B
divided by
Invested Capital 62.39B 64.46B 75.00B 69.46B 68.03B
Cash ROIC 25.23% 24.05% 17.79% 18.26% 18.90%

Excellent Return on Equity over the past 5 years

Over the past 5 years, IBM has generated strong profits with money shareholders have invested. This is considered one of the best indicators of quality management. Beware of extremely high Return on Equity (> 50%) as this is often unsustainable.

IBM has generated $86.57 of Earnings for every $100 of Shareholders' Equity.
Figures in USD. Fiscal year ends in December
20112012201320142015
Net Income 15.86B 16.60B 16.48B 12.02B 13.19B
divided by
Stockholders' Equity 20.14B 18.86B 22.79B 11.87B 14.26B
Return on Equity 78.73% 88.04% 72.32% 101.30% 92.48%

Excellent Business Performance over the past 10 years

IBM has been able to maintain profitability in good times and bad. This could mean IBM has an extremely strong business or has the ability to scale down costs when needed. This should be a fairly resilient business, but double check for future sustainability by looking at its Risk Factors in the Annual Report.

IBM has created positive free cash flow for 9 or more of the past 10 years.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Free Cash Flow 9.84B 10.58B 14.64B 17.33B 15.36B 15.74B 15.50B 13.35B 12.69B 12.86B

Weak Balance Sheet

IBM's financial position is not ideal. The key is to check whether IBM is using debt to fuel its growth and the sustainability of that tendency. Highly capital intensive businesses (see Economic Moat) follow this route, which can deeply impact the future prospects of the business.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Cash 10.66B 16.15B 12.91B 13.97B 11.65B 11.92B 11.13B 11.07B 8.48B 8.19B
Current Assets 44.66B 53.18B 49.00B 48.94B 48.12B 50.93B 49.43B 51.35B 49.42B 42.50B
Total Assets 103.23B 120.43B 109.52B 109.02B 113.45B 116.43B 119.21B 126.22B 117.53B 110.50B
Current Liabilities 40.09B 44.31B 42.44B 36.00B 40.56B 42.12B 43.63B 40.15B 39.60B 34.27B
Total Liabilities 74.73B 91.96B 96.06B 86.39B 90.41B 96.30B 100.35B 103.43B 105.66B 96.23B
Stockholder' Equity 28.51B 28.47B 13.47B 22.64B 23.05B 20.14B 18.86B 22.79B 11.87B 14.26B
Current Ratio 1.11 1.20 1.15 1.36 1.19 1.21 1.13 1.28 1.25 1.24
TL-to-TA 0.72 0.76 0.88 0.79 0.80 0.83 0.84 0.82 0.90 0.87

Consistent Reinvestment of Profits over the past 10 years

IBM has consistently retained profits. This may put IBM in a strong position to invest for the future, by buying new machinery, investing in R&D or a number of other options. By effectively using these earnings, IBM can greatly improve their long-term economic picture.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Retained Earnings 52.43B 60.64B 70.35B 80.90B 92.53B 104.86B 117.64B 130.04B 137.79B 146.12B
Retained Earnings Growth - 15.65% 16.02% 14.99% 14.38% 13.32% 12.19% 10.54% 5.96% 6.05%

Potential Competitive Advantage over the past 10 years

IBM potentially has a competitive advantage. This could be strong branding, the ability to keep costs low, or some other characteristic that is hard to replicate. Look at its future prospects to determine sustainability and whether the economic moat will strengthen.

$13.80 of every $100 of Revenue have been pure profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Net Income 9.49B 10.42B 12.33B 13.43B 14.83B 15.86B 16.60B 16.48B 12.02B 13.19B
divided by
Revenue 91.42B 98.79B 103.63B 95.76B 99.87B 106.92B 104.51B 99.75B 92.79B 81.74B
Net Profit Margin 10.38% 10.55% 11.90% 14.02% 14.85% 14.83% 15.89% 16.52% 12.96% 16.14%

Strong Pricing Power over the past 10 years

IBM has maintained substantial gross margins, suggesting that they have been able to set prices without consideration of the cost of goods sold. This potentially leaves flexibility in inflationary environments to raise prices on consumers and maintain profitability.

$51.07 of every $100 worth of sales have been Gross Profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Gross Profit 38.30B 41.73B 45.66B 43.79B 46.01B 100.66B 50.30B 48.51B 46.41B 40.68B
divided by
Revenue 91.42B 98.79B 103.63B 95.76B 99.87B 106.92B 104.51B 99.75B 92.79B 81.74B
Gross Margin 41.89% 42.24% 44.06% 45.72% 46.07% 94.15% 48.13% 48.63% 50.01% 49.77%

Medium Capital Intensity over the past 10 years

IBM has used a reasonable amount of their financial resources to invest in facilities and equipment required to produce its goods and services. This isn't perfect, but it shouldn't be an area of concern unless this number is strongly trending upwards.

33.68% of Profits are being spent on Capital Expenditures, like Property, Plant, & Equipment, required to run the business.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Capital Expenditure 5.17B 5.51B 4.17B 3.45B 4.19B 4.11B 4.08B 4.14B 4.18B 4.15B
divided by
Net Income 9.49B 10.42B 12.33B 13.43B 14.83B 15.86B 16.60B 16.48B 12.02B 13.19B
Capital Expenditure Ratio 54.42% 52.84% 33.82% 25.68% 28.21% 25.91% 24.58% 25.12% 34.79% 31.47%

Very Strong Dividend History over the past 10 years

IBM has consistently distributed a dividend for at least the past 10 years. Such a long dividend history suggests IBM is very established in its market and that its dividend distribution is likely to continue for a significant period of time.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Dividend Paid 1.68B 2.15B 2.59B 2.86B 3.18B 3.47B 3.77B 4.06B 4.27B 4.90B
divided by
Shares Outstanding 1.55B 1.45B 1.38B 1.34B 1.29B 1.21B 1.16B 1.10B 1.01B 982.70M
Dividend Paid Per Share 1.08 1.48 1.87 2.13 2.47 2.86 3.27 3.68 4.22 4.98
Price at Year End 88.73 101.96 78.73 127.42 143.67 183.17 189.83 186.41 160.05 139.34
Dividend Yield 1.22% 1.45% 2.38% 1.67% 1.72% 1.56% 1.72% 1.97% 2.64% 3.58%

Strong History of Stock Buybacks over the past 10 years

IBM has a strong history of delivering increased value for shareholders in the form of stock buybacks. These have helped improve financial metrics and increase each shareholders' relative ownership stake in the company, due to fewer shares outstanding and holding the same number of shares.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Shares Outstanding 1.55B 1.45B 1.38B 1.34B 1.29B 1.21B 1.16B 1.10B 1.01B 982.70M
Stock Bought Back - 7.10% 4.98% 3.01% 4.19% 6.06% 5.05% 4.75% 9.21% 2.78%
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Discussion
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2
Posted by algokid1  (on March 31, 2012)
IBM stock is up over 90 % from the past 10years , minuscule compared to AAPL 3650 %. But 2011 has been a great year for IBM. it's SmartCloud technology is helping deliver high-powered analytics to small businesses and governments, optimizing everything from road construction to call centers.

The "big data" revolution that IBM is leading has led to multiple successful initiatives, hence why the stock rose 25 % last year. A decade ago, IBM's operating margin was under 10% and return on invested capital (ROIC) was only 12%. As of 2011, operating margin increased to 20%, while ROIC surged to almost 35%. This was made possible by dumping low margin business and focusing on profitable one.

Over the past ten years, IBM generated almost $120 billion in free cash flow, or about 60% of its current market capitalization; over the next five years, management targets another $100 billion.

IBM is one of the best company in the Tech sector. If the company can sustain it's ROIC of 30 % , I believe we'll see the stock make new highs in the next 5 years. But just like anything else in tech, NOTHING is guarantee. RIMM and other tech companies ,were once the next " apple" .

I have some 2013 LEAP calls on this , still cheap.
1
Posted by mattschwartz  (on April 1, 2012)
IBM is certainly an impressive company but it doesn't mean it's a good investment right now.

Management may be targeting $100 billion in FCF in the next 5 years but it doesn't mean that will result in strong returns for shareholders.

It's just not the right price.
1
Posted by algokid1  (on March 31, 2012)
SOURCE : BLOOMBERG, SEEKING ALPHA
1
Posted by Scudy  (on May 11, 2012)
Respectable companies are companies who are devoting their dollars towards expansion. IBM recognized that they had to quit the computer business in 2004 and have moved towards consulting services, collecting huge revenue from it, cloud computing, Watson. IBM is going nowhere but up. Having solidified themselves as middlemen, there is no reason why 200 is cheap.
0
Posted by captaincapital  (on March 21, 2012)
Its interesting to see that Buffett has invested in IBM. He's not typically a tech investor. I think it comes down to IBM's ability to consistently transform itself as technology changes and thusly, flourish.

There's a great article about this that breaks down each of the changes and how they've adapted. I found it on Seeking Alpha: http://seekingalpha.com/article/379411-ibm-big-transformation-big-data-big-returns