* Note: Prices are in Million (M) USD.
Description:
International Business Machines Corporation (IBM) is an American multinational technology company headquartered in Armonk, New York, with operations in over 170 countries. The company began in 1911, founded in Endicott, New York, as the Computing-Tabulating-Recording Company (CTR) and was renamed International Business Machines in 1924. IBM is incorporated in New York. IBM produces and sells computer hardware, middleware and software, and provides hosting and consulting services in areas ranging from mainframe computers to nanotechnology. IBM is also a major research organization, holding the record for most annual U.S. patents generated by a business (as of 2020) for 28 consecutive years. Inventions by IBM include the automated teller machine (ATM), the floppy disk, the hard disk drive, the magnetic stripe card, the relational database, the SQL programming language, the UPC barcode, and dynamic random-access memory (DRAM). The IBM mainframe, exemplified by the System/360, was the dominant computing platform during the 1960s and 1970s.
These criteria used Company's Cash, EBITDA and Debt balance to determines its fair value:
Cash : $11,943 M
Debt : $67,719 M
EBITDA : $12,902 M
Net Debt (Debt - Cash): $55,776 M
Since EBITDA cannot cover net debt within 3 years, Avoid This Stock.
This criteria used industry in which company operates:
Sector: Technology
Industry: Information technology services
Based on sector, 5 points assigned.
This criteria used Company's Price To Earning (P/E) Ratio to determines its fair value:
Forward PE Ratio: 21.41
Since Forward PE Ratio is between 20 - 25, 2 points assigned.
This criteria used Company's ability to convert Sales into free cash flow to determine fair value:
Using last 20 overlapping fiscal years (max 20).Average Free Cash Flow: $12,588 M
Average Revenue: $83,789 M
Revenue Converted To Free Cash Flow (%): 15.0%
Since Free Cash Flow (FCF) to Revenue percentage is greater than 15, 3 points assigned.
This criteria used company's growth potential to calculate its fair value:
Latest Revenue (2024-12-31): $62,753 M
Revenue 4 Years Ago (2020-12-31): $73,621 M
Last 5 Years Average Revenue Growth: -3%
Since Revenue Growth is between 0 - 5, 1 point assigned.
This criteria used Company's ability to buy back its own share:
Latest Share Count (2024-12-31): $937 M
Share Count 5 Years Ago (2020-12-31): $897 M
Company is not buying back its own shares, 0 points assigned.
This criteria used Company's dividend payout ratio to determine its fair value:
Next Year Earnings Per Share (EPS): $11.87
Trailing 12-Month Earnings Per Share (EPS): $11.09
Average Earnings Per Share (EPS): $11.48
Dividend Per Share (DPS): $7
Payout Ratio: 58%
Dividend Yield: 3%
Since company Payout Ratio is greater than 50, 1 point assigned.
Since Dividend Yield is greater than 2, 2 points assigned.
This criteria used Company's Return On Equity (ROE%) to determine its fair value:
Using last 20 valid ROE years (max 20).Average ROE: 52.9%
Since Average ROE is greater than 20, 5 points assigned.
This criteria used Company's current price to its 52 week low price to determines its fair value:
Current Price: $246
52-Week Low: $185
Threshold Price (15% Above 52-Week Low): $213
Since Current price is not within 15% threshold, 0 point assigned.
This criteria used Company's Market Cap to determines its fair value:
Market Capitalization: $235,004 M
Since Market Cap is between 100B - 500B, 3 points assigned.
% Exposure to Total Portfolio
Based on the market cap, we recommend do not exceed 4% exposure of Total Portfolio.
Value-Trade has assigned 22 points to above International Business Machines (IBM) stock.
Heads up: One or more P/E inputs look exaggerated and may skew the blend.
• ROE Based PE
50.00 (>2× median)
Further research is recommended; please use your own due diligence.In such cases, multiplying earnings by the long-run average P/E typically gives a closer, more reliable fair value.
Rule of thumb: Last 20 Years Avg P/E (13.07)
× EPS ($11.48) = $150.04.
Last 20 Years Avg PE 13.07, Fair Value PE 25, Industry Based PE 25, RCFC Based PE 22.02, ROE Based PE 50, Risk-Free Anchored PE (25% MoS) 17.08. Based on these 6 values, average assigned is 25.36. Value-Trades has assined P/E value 25.36. Since an average (Current Year EPS + Next Year EPS) earning per share is $11.48.
The fair value of International Business Machines (IBM) stock should be (25.36 x $11.48) = $291.16.
