International Business Machines Corp (NYSE: IBM)

Sector: Technology Industry: Information Technology Services CIK: 0000051143
Market Cap 229.77 Bn
P/B 12.80
P/E 29.79
P/S 2.98
ROIC (Qtr) 8.61
Div Yield % 3.12
Rev 1y % (Qtr) 9.11
Total Debt (Qtr) 66.57 Bn
Debt/Equity (Qtr) 2.39
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About

Investment thesis

Bull case

  • Robust free cash flow of 11.99B exceeds capital expenditure of 1.49B by 8.05x, indicating strong organic growth funding capability.
  • Retained earnings of 151.58B provide full 2.62x coverage of long-term debt 57.82B, indicating strong internal capital position.
  • Retained earnings of 151.58B provide strong 6.73x coverage of other current liabilities 22.53B, indicating earnings quality.
  • Operating cash flow of 13.48B fully covers other non-current liabilities 7.62B by 1.77x, showing strong long-term stability.
  • Operating cash flow of 13.48B provides strong 9.65x coverage of inventory 1.40B, indicating efficient inventory management.

Bear case

  • Operating cash flow of 13.48B barely covers its investment activities of (13.10B), with a coverage ratio of -1.03, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Investment activities of (13.10B) provide weak support for R&D spending of 8.10B, which is -1.62x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Operating cash flow of 13.48B provides thin coverage of dividend payments of (6.23B) with a -2.17 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Cash reserves of 11.60B provide limited coverage of acquisition spending of (8.45B), which is -1.37x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Operating cash flow of 13.48B provides insufficient coverage of deferred revenue obligations of 17.74B, which is 0.76x, raising concerns about future service delivery capabilities.

Segments Breakdown of Revenue (2024)

Geographical Breakdown of Revenue (2024)

Peer comparison

Companies in the Information Technology Services
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 IBM International Business Machines Corp 229.77 Bn 29.79 2.98 66.57 Bn
2 ACN Accenture plc 136.96 Bn 17.99 1.94 8.20 Bn
3 INFY Infosys Ltd 61.29 Bn 19.41 3.18 0.68 Bn
4 CTSH Cognizant Technology Solutions Corp 31.81 Bn 14.26 1.51 1.15 Bn
5 FIS Fidelity National Information Services, Inc. 28.54 Bn -1.17 2.90 13.00 Bn
6 WIT Wipro Ltd 23.98 Bn 16.25 2.37 2.35 Bn
7 LDOS Leidos Holdings, Inc. 20.68 Bn 14.28 1.20 5.24 Bn
8 BR Broadridge Financial Solutions, Inc. 20.38 Bn 19.09 2.84 3.17 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 1.79 1.23
EV to Cash from Ops. EV/CFO 17.01 3.12
EV to Debt EV to Debt 3.94 3.45
EV to EBIT EV/EBIT 22.28 -4.05
EV to EBITDA EV/EBITDA 15.16 3.57
EV to Free Cash Flow [EV/FCF] EV/FCF 20.45 -2.69
EV to Market Cap EV to Market Cap 1.14 1.54
EV to Revenue EV/Rev 3.40 47.25
Price to Book Value [P/B] P/B 12.80 3.04
Price to Earnings [P/E] P/E 29.79 4.15
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 1.27 -0.59
Dividend Payout Ratio % Div Payout % (Qtr) 78.50 14.14
Dividend per Basic Share Div per Share (Qtr) 6.70 0.47
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 52.17 4.61
Interest Coverage Int. cover (Qtr) 6.04 -318.37
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -53.77 -256.13
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -12.22 128.67
Dividend Growth (1y) % Div 1y % (Qtr) 0.60 6.73
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 16.65 -36.77
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 28.17 -22.62
EBIT Growth (1y) % EBIT 1y % (Qtr) 42.61 -87.06
EBT Growth (1y) % EBT 1y % (Qtr) 51.11 75.53
EPS Growth (1y) % EPS 1y % (Qtr) 22.03 122.99
FCF Growth (1y) % FCF 1y % (Qtr) -4.89 -8,761.26
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 6.86 -4.36
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.45 0.79
Cash Payout Ratio Cash Payout (Qtr) 0.42 0.00
Cash Ratio Cash Ratio (Qtr) 0.33 0.73
Current Ratio Curr Ratio (Qtr) 0.93 2.20
Debt to Equity Ratio Debt/Equity (Qtr) 2.39 0.98
Interest Cover Ratio Int Coverage (Qtr) 6.04 -318.37
Times Interest Earned Times Interest Earned (Qtr) 6.04 -318.37
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 24.80 -369.53
EBIT Margin % EBIT Margin % (Qtr) 17.37 -585.52
EBT Margin % EBT Margin % (Qtr) 14.49 -637.04
Gross Margin % Gross Margin % (Qtr) 57.80 24.60
Net Profit Margin % Net Margin % (Qtr) 12.10 -639.67