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.
