IBM  International Business Machine...

Exchange

NYSE

Sector

Technology

Industry

Computer Manufacturing

Market Cap.

143.40B

Vuru Grade

68.78/100

Current Price

$152.64
+0.66 (+0.43%)

Growth Price

$98.55
Overvalued by 35.44%

Stability Price

$47.98
Overvalued by 68.57%

Company Metrics

  • P/E 12.55
  • P/S 1.80
  • P/B 7.79
  • EPS 12.16
  • Cash ROIC 19.33%
  • Cash Ratio 0.24
  • Dividend 6.00 / 3.95 %
  • Avg. Vol. 4.47M
  • Shares 939.47M
  • Market Cap. 143.40B

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

August 18th Options Now Available For International Business Machines (IBM)
Nasdaq - 19 hours ago
Investors in International Business Machines Corp. (Symbol: IBM) saw new options become available today, for the August 18th expiration.
International Business Machines Corp (IBM) Closes 0.43% Up on the Day for May 22 - Equities.com
International Business Machines Corp. (IBM) Increases Dividend to $1.50 Per Share - The Cerbat Gem
Better Buy: International Business Machines Corporation vs. Coca-Cola
Motley Fool - May 11, 2017
Business computing behemoth International Business Machines Corporation (NYSE:IBM) might not seem to have much in common with soft drink titan The Coca-Cola Company (NYSE:KO), but there are more similarities than you might expect.
Cover International Business Machines Corp. (NYSE:IBM) Short Positions - Stock Traders Daily
Experts Analysis: International Business Machines Corp. (NYSE:IBM) - ExpertGazette
Red Flags For IBM
Seeking Alpha - 12 hours ago
Shares of IBM (NYSE:IBM) may sound like a good value play. The company has a long track record of annual dividend increases.
Has IBM Been Punished Enough?
Seeking Alpha - May 19, 2017
Warren Buffett recently sold some of his IBM stock. Since March, shares are down 17.5%. Is this an overreaction? IBM has produced negative topline growth for 20 straight quarters. Does the stock's 4% yield trump this dubious distinction? Fundamentals ...
International Business Machines Corporation: The Bear Case from a Bull
Motley Fool - Apr 25, 2017
Recently, I've been bullish on International Business Machines' (NYSE:IBM) opportunity in the machine learning space.
International Business Machines Enters Oversold Territory
Nasdaq - May 17, 2017
But making International Business Machines Corp. an even more interesting and timely stock to look at, is the fact that in trading on Wednesday, shares of IBM entered into oversold territory, changing hands as low as $151.98 per share.
The Dust Has Cleared And Now International Business Machines Corporation (IBM ...
NY Stock News - 21 hours ago
International Business Machines Corporation (IBM) has created a compelling message for traders in the most recent trading. That message has grown stronger as the technical chart setup has developed into a more composite picture for the stock.
What To Do About IBM And Grainger Downgrades?
Seeking Alpha - May 8, 2017
In this article, I describe how I use credit ratings as one tool in portfolio design, and how I reacted to the recent credit downgrades of W.W.
Look Who Is Selling IBM Shares Now!
Seeking Alpha - May 15, 2017
International Business Machines (NYSE:IBM) has been losing revenue year after year for some time now. Management has been repositioning the company to develop its businesses with greater growth potential.
IBM, a Pioneer of Remote Work, Calls Workers Back to the Office
Fox Business - May 18, 2017
The shift is particularly surprising since the Armonk, N.Y. company has been among the business world's staunchest boosters of remote work, both for itself and its customers.
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.

$152.64 Current Price

$98.55 Growth Price (DCF)

Overvalued by 35.44%


Growth Rate Assumed by Market: 10.44%


Future Free Cash Flow Growth Rate: -2.7%


Discount Rate: 15.0%


Show Free Cash Flow numbers

$47.98 Stability Price (EPV)

Overvalued by 68.57%


Discount Rate: 15.0%

$187.80 Book Price

Undervalued by 23.04%


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 $19.33 of cash for every $100 invested.
Figures in USD. Fiscal year ends in December
20122013201420152016
Free Cash Flow 15.50B 13.35B 12.69B 12.86B 12.81B
divided by
Invested Capital 64.46B 75.00B 69.46B 68.03B 72.67B
Cash ROIC 24.05% 17.79% 18.26% 18.90% 17.63%

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 $83.84 of Earnings for every $100 of Shareholders' Equity.
Figures in USD. Fiscal year ends in December
20122013201420152016
Net Income 16.60B 16.48B 12.02B 13.19B 11.87B
divided by
Stockholders' Equity 18.86B 22.79B 11.87B 14.26B 18.25B
Return on Equity 88.04% 72.32% 101.30% 92.48% 65.07%

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
2007200820092010201120122013201420152016
Free Cash Flow 10.58B 14.64B 17.33B 15.36B 15.74B 15.50B 13.35B 12.69B 12.86B 12.81B

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
2007200820092010201120122013201420152016
Cash 16.15B 12.91B 13.97B 11.65B 11.92B 11.13B 11.07B 8.48B 8.19B 8.53B
Current Assets 53.18B 49.00B 48.94B 48.12B 50.93B 49.43B 51.35B 49.42B 42.50B 43.89B
Total Assets 120.43B 109.52B 109.02B 113.45B 116.43B 119.21B 126.22B 117.53B 110.50B 128.30B
Current Liabilities 44.31B 42.44B 36.00B 40.56B 42.12B 43.63B 40.15B 39.60B 34.27B 36.28B
Total Liabilities 91.96B 96.06B 86.39B 90.41B 96.30B 100.35B 103.43B 105.66B 96.23B 99.22B
Stockholder' Equity 28.47B 13.47B 22.64B 23.05B 20.14B 18.86B 22.79B 11.87B 14.26B 18.25B
Current Ratio 1.20 1.15 1.36 1.19 1.21 1.13 1.28 1.25 1.24 1.21
TL-to-TA 0.76 0.88 0.79 0.80 0.83 0.84 0.82 0.90 0.87 0.77

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
2007200820092010201120122013201420152016
Retained Earnings 60.64B 70.35B 80.90B 92.53B 104.86B 117.64B 130.04B 137.79B 146.12B 152.76B
Retained Earnings Growth - 16.02% 14.99% 14.38% 13.32% 12.19% 10.54% 5.96% 6.05% 4.54%

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.

$14.25 of every $100 of Revenue have been pure profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Net Income 10.42B 12.33B 13.43B 14.83B 15.86B 16.60B 16.48B 12.02B 13.19B 11.87B
divided by
Revenue 98.79B 103.63B 95.76B 99.87B 106.92B 104.51B 99.75B 92.79B 81.74B 79.92B
Net Profit Margin 10.55% 11.90% 14.02% 14.85% 14.83% 15.89% 16.52% 12.96% 16.14% 14.86%

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.

$51.67 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
2007200820092010201120122013201420152016
Gross Profit 41.73B 45.66B 43.79B 46.01B 100.66B 50.30B 48.51B 46.41B 40.68B 38.29B
divided by
Revenue 98.79B 103.63B 95.76B 99.87B 106.92B 104.51B 99.75B 92.79B 81.74B 79.92B
Gross Margin 42.24% 44.06% 45.72% 46.07% 94.15% 48.13% 48.63% 50.01% 49.77% 47.92%

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.

31.74% 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
2007200820092010201120122013201420152016
Capital Expenditure 5.51B 4.17B 3.45B 4.19B 4.11B 4.08B 4.14B 4.18B 4.15B 4.15B
divided by
Net Income 10.42B 12.33B 13.43B 14.83B 15.86B 16.60B 16.48B 12.02B 13.19B 11.87B
Capital Expenditure Ratio 52.84% 33.82% 25.68% 28.21% 25.91% 24.58% 25.12% 34.79% 31.47% 34.96%

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
2007200820092010201120122013201420152016
Dividend Paid 2.15B 2.59B 2.86B 3.18B 3.47B 3.77B 4.06B 4.27B 4.90B 5.26B
divided by
Shares Outstanding 1.45B 1.38B 1.34B 1.29B 1.21B 1.16B 1.10B 1.01B 982.70M 958.71M
Dividend Paid Per Share 1.48 1.87 2.13 2.47 2.86 3.27 3.68 4.22 4.98 5.48
Price at Year End 101.96 78.73 127.42 143.67 183.17 189.83 186.41 160.05 139.34 165.99
Dividend Yield 1.45% 2.38% 1.67% 1.72% 1.56% 1.72% 1.97% 2.64% 3.58% 3.30%

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
2007200820092010201120122013201420152016
Shares Outstanding 1.45B 1.38B 1.34B 1.29B 1.21B 1.16B 1.10B 1.01B 982.70M 958.71M
Stock Bought Back - 4.98% 3.01% 4.19% 6.06% 5.05% 4.75% 9.21% 2.78% 2.50%
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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