IBM IBM
What does IBM do?
IBM is a globally active technology group that offers software, consulting services and infrastructure to companies and public-sector clients. The business is divided into the Software, Consulting, Infrastructure and Financing segments. In software, the focus is on platforms for hybrid cloud and artificial intelligence, data management and automation, which are often sold under recurring license and subscription models.
The Consulting segment comprises strategy and technology consulting, application modernization and the operation of IT processes for customers. Infrastructure supplies server and storage systems for operation in customers' own data centers and in the cloud, including mainframes for business-critical applications. The Financing segment supports customers in financing IBM products and services. Competitively, IBM faces large cloud providers, software groups and international consulting firms, and positions itself mainly with large, regulated companies with complex IT landscapes. In doing so, the company combines its own technology with consulting and long-standing customer relationships.
Score profile
Rank vs. Information Technology Services (30 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, IBM ranks among the best in the group Information Technology Services (8.7/10). On growth, the company ranks in the middle in the group Information Technology Services (5.9/10). On valuation (higher = cheaper), the stock ranks in the bottom fifth in the group Information Technology Services (1.2/10). On financial strength, IBM ranks below average in the group Information Technology Services (2.2/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 18.5x | 11.5x | better than 9 % |
| Trailing P/E | 20.9x | 19.9x | better than 40 % |
| PEG ratio | 2.3x | 1.2x | better than 26 % |
| EV/EBITDA | 17.4x | 10.2x | better than 8 % |
| Price/sales | 3.3x | 1.1x | better than 5 % |
| Price/book | 6.5x | 3.0x | better than 16 % |
| Revenue growth | 4.7% | 4.8% | better than 48 % |
| Earnings growth | 25.0% | 5.5% | better than 70 % |
| Gross margin | 58.0% | 32.7% | better than 85 % |
| Operating margin | 17.0% | 11.1% | better than 82 % |
| Net margin | 16.0% | 5.3% | better than 92 % |
| Return on equity | 34.8% | 17.4% | better than 91 % |
| Debt/equity | 185.4% | 112.0% | better than 25 % |
| Current ratio | 0.9x | 1.5x | better than 5 % |
| Free cash flow yield | 5.3% | 6.6% | better than 37 % |
| Dividend yield | 2.8% | 1.9% | – |
| Payout ratio | 57.5% | 27.0% | – |
| Beta | 0.76 | 0.87 | – |
Valuation: what is IBM worth?
Two valuation approaches – a discounted cash flow model and a valuation at the industry’s median multiples – give IBM a model range of 117.95 USD to 412.42 USD per share.
23 analysts, average rating “Buy”, average price target 259.30 USD (+6.0%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- Revenue depends heavily on demand from large companies for hybrid cloud, data and AI solutions.
- Recurring software revenue and long-term customer contracts provide a comparatively stable earnings base.
- The mainframe product launch cycles and the IT budgets of corporate customers influence the infrastructure business.
Risks
- Large cloud providers and specialized software companies increase competitive and pricing pressure in core markets.
- The consulting business is sensitive to economy-driven cuts in IT projects and to pricing and utilization pressure.
- Technological disruption, for example from AI, can devalue existing products and services or require high investment.
What to look for with IBM
Growth and margin in the software segment are particularly informative, as this segment carries most of the profitability and reflects recurring revenue.