Thursday, March 9, 2017

Analysis of IBM 2017


Logo of IBM 2017

Company: IBM

ISIN US4592001014 | WKN 851399

Business: An American IT service company. They are currently standing on six pillars and each year they are shifting things around and start reporting new areas. 

Active: World wide making sales in over 170 countries.

P/E: 13.1

To find out more regarding IBM then please click on analysis of IBM 2016.

Contrarian analysis of IBM 2017

The P/E of IBM is good with 13.1 but the P/B is awful with 9.5 which gives in total a very clear no go from Graham. Earnings to sales are great with 17% and the ROE is insane with 72% even though it starts to fall back in dramatic leaps. The book to debt ratio improved significantly and what used like a shaky bank is now... well... looking better let us put it like that.
In the last five years they have had a -5.2% yearly revenue growth rate which is very bad and this gives a motivated P/E of around 8 which means that IBM is today slightly over valued by the market.
They spend a healthy amount of money on R&D since it represents 40% of their earnings.
They pay an acceptable dividend of 3.1% which represents 41% of their earnings so it is all good in my book.

Conclusion: IBM is still not doing well but for me this actually looks like a turning point. Due to the latest increases in share price I must assume that the market have already realised this and started to buy shares. a timing that I will never be able to join in on. I will keep my shares for now.

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