Strong Revenue Position
Healthy Return on Equity
Robust Gross Profit Margin
Decent Net Profit Margin
Sufficient Liquidity Ratios
Cash Reserves
📈 Strong Revenue Growth
💵 Strong Free Cash Flow Generation
🔒 Competitive Position in Software and AI
🚀 Optimistic Growth Outlook
⚙️ Focus on Innovation and AI
High Price to Earnings Ratio
Elevated EV to EBITDA
Low Operating Profit Margin
High Debt Levels
Low Interest Coverage
📉 Challenges in Consulting Revenue
⚠️ Infrastructure Segment Struggles
🔄 Macro Economic Headwinds
Overall, IBM demonstrates strong business quality with solid revenue growth, robust free cash flow generation, and a competitive edge in software and AI. However, challenges in consulting and infrastructure segments, alongside macroeconomic uncertainties, could pose risks. The company is optimistic about future prospects due to its growth outlook and innovation focus, indicating potential for continued success.
Analysis Date: January 29, 2025
Last Updated: March 12, 2025
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
Benjamin Graham's value investing approach focuses on finding stocks with a significant margin of safety between their intrinsic value and market price.
Intrinsic Value
Estimated fair value based on Graham's formula
$250.46
Current Market Price: $225.04
IV/P Ratio: 1.11x (>1.0 indicates undervalued)
Margin of Safety
Gap between intrinsic value and market price
10.0%
Graham recommended a minimum of 20-30% margin of safety
Higher values indicate a greater potential discount to fair value
Graham Criteria Checklist
Benjamin Graham's value investing checklist for IBM
Positive earnings (5+ years)
Dividend history (5+ years)
P/E ratio ≤ 20 (34.97)
P/B ratio ≤ 1.5 (7.71)
Current ratio ≥ 2.0 (1.04x)
Long-term debt < Net current assets (39.21x)
Margin of safety (10.0%)
IBM does not meet all Graham criteria
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
IBM's gross profit margin of 56.65% highlights its strong ability to generate profit from sales before accounting for operating expenses, which is a positive indicator of its business model.
The net profit margin of 9.6% shows that IBM is able to retain a reasonable portion of its revenues as profit after all expenses, contributing to overall profitability.
The operating profit margin of 5.64% indicates that IBM faces challenges in converting revenues into operating profit, which could raise concerns about operational efficiency.
Profitability metrics measure a company's ability to generate earnings relative to its revenue, operating costs, and other relevant metrics. Higher values generally indicate better performance.
Return on Equity (ROE)
Measures how efficiently a company uses its equity to generate profits
24.33%
Higher values indicate better returns for shareholders
TTM (as of 2025-04-16)
Return on Assets (ROA)
Measures how efficiently a company uses its assets to generate profits
2.13%
Higher values indicate better asset utilization
TTM (as of 2025-04-16)
Gross Profit Margin
Percentage of revenue retained after accounting for cost of goods sold
56.65%
Higher values indicate better efficiency in production
TTM (as of 2025-04-16)
Net Profit Margin
Percentage of revenue retained after accounting for all expenses
9.60%
Higher values indicate better overall profitability
TTM (as of 2025-04-16)
With a current ratio of 1.04 and a quick ratio of 1.00, IBM shows it can meet its short-term obligations comfortably, indicating strong liquidity.
Having cash per share of $15.76 supports IBM in managing its operations and investments, providing a cushion against financial challenges.
A debt-to-equity ratio of 2.14 suggests that IBM is significantly leveraged, which could pose risks, especially during economic downturns.
With an interest coverage ratio of 2.07, IBM might face difficulties in covering interest expenses, indicating potential financial strain.
Financial health metrics assess a company's ability to meet its financial obligations and its overall financial stability.
Debt to Equity Ratio
Total debt divided by total equity
2.13x
Lower values indicate less financial leverage and risk
Less than 1.0 is conservative, 1.0-2.0 is moderate, >2.0 indicates high risk
Q4 2024
Current Ratio
Current assets divided by current liabilities
1.04x
Higher values indicate better short-term liquidity
Less than 1.0 is concerning, 1.0-2.0 is adequate, greater than 2.0 is good
Q4 2024
IBM delivered a revenue growth of 3% for the year, with Software growing at 9%, showcasing its solid position in the market. This is further supported by the company's achievement of a 6% CAGR over the mid-term model set in 2021.
IBM generated $12.7 billion in free cash flow, its highest level in many years, indicating effective cash management and operational efficiency.
The company has positioned itself as a leader in generative AI and continues to capitalize on its hybrid cloud solutions, with a strong focus on software, which now constitutes 45% of the business.
Consulting revenue experienced a decline of 1% due to a dynamic market environment, indicating potential vulnerabilities in this segment.
The Infrastructure segment saw a 6% decline in revenue, reflecting product cycle dynamics, which may impact the overall growth trajectory.
IBM expects revenue growth to inflect higher to over 5% in 2025, driven by strong performance across its Software and Consulting segments. The company anticipates significant contributions from its upcoming mainframe launch and continued strength in software innovation.
IBM's investment in generative AI and partnerships with major tech providers will enhance its service offerings, positioning it for future success in a technology-driven market.
IBM faces challenges from geopolitical tensions, interest rate volatility, and supply chain vulnerabilities that could impact client spending and overall growth.