International Business Machines (IBM) Stock Dips 2.7% as Fundamentals Signal Challenges Ahead

A strong performer from today's morning trading session is International Business Machines, whose shares rose 2.7% to $139.13 per share. For those of you thinking about investing in the stock, here is a brief value analysis of the stock using the company's basic fundamental ratios.

International Business Machines's Valuation Is in Line With Its Sector Averages:

International Business Machines Corporation, together with its subsidiaries, provides integrated solutions and services worldwide. The company belongs to the Technology sector, which has an average price to earnings (P/E) ratio of 27.16 and an average price to book (P/B) ratio of 6.23. In contrast, International Business Machines has a trailing 12 month P/E ratio of 62.1 and a P/B ratio of 5.85.

International Business Machines's PEG ratio is 4.65, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.

The Company's Revenues Are Declining:

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $77,147 $73,620 $57,351 $60,530
Gross Margins 47.3% 48.3% 54.9% 54.0%
Operating Margins 13.7% 9.2% 12.0% 13.5%
Net Margins 12.22% 7.59% 10.01% 2.71%
Net Income (MM) $9,431 $5,590 $5,742 $1,639
Net Interest Expense (MM) -$1,344 -$1,288 -$1,155 -$1,216
Depreciation & Amort. (MM) -$6,059 -$6,695 -$6,416 -$4,802
Earnings Per Share $10.56 $6.23 $6.35 $2.24
EPS Growth n/a -41.0% 1.93% -64.72%
Diluted Shares (MM) 893 897 905 907
Free Cash Flow (MM) $12,400 $15,155 $10,415 $8,575
Capital Expenditures (MM) -$2,370 -$3,042 -$2,381 -$1,860
Net Current Assets (MM) -$92,781 -$96,080 -$83,466 -$76,104
Current Ratio 1.02 0.98 0.88 0.92
Long Term Debt (MM) $54,102 $54,355 $44,917 $46,189
Net Debt / EBITDA 3.19 3.91 3.43 6.25

International Business Machines has declining revenues and decreasing reinvestment in the business, declining EPS growth, and a highly leveraged balance sheet. On the other hand, the company benefits from wider gross margins than its peer group and consistent free cash flow. Furthermore, International Business Machines has weak operating margings with a stable trend.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.