NYSE:IBM
$123.57
(2/9 2:51PM)
+1.4%
| Open | $122.65 |
Mkt Cap | $160.1 Billion |
| High | $124.2 |
52Wk High | $134.25 |
| Low | $122.46 |
52Wk Low | $83.02 |
| Volume | 4.5 Million |
Avg Vol 10D | 7.7 Million |
IBM Stock Evaluation
Looking at IBM since last week, there has been little movement in price on a percentage basis. Additionally, there haven't been significant revisions to earnings estimates for IBM. Given this, we are maintaining our Fairly Valued rating. While there may not have been any meaningful changes in either price or earnings outlook, we still want to analyze where IBM is in relationship to its historical fundamentals. Looking at the ratios and multiples described below and throughout this report is the best way to evaluate the strength of IBM's current Fairly Valued rating.
Recommendation Summary
As frequent users of Ockham Research are aware, we strive to adhere to the principal of Ockham's Razor. This company ideal drives us to keep our stock analysis as simple as possible, but of course, no simpler than is necessary. It is in that vein that we focus much of our analysis on fundamental factors, peer analysis, and valuations versus historically normal ranges. However, we also apply standard deviation and volatility studies for each index and sector in order to understand more completely the risks associated with each market environment.
In the last twelve months the NYSE has made some gains that start to make a value investor slightly cautious about the future. We are leaving our rating for IBM unchanged this week even as the Technology sector has actually outperformed the broad market's appreciation. At least in this stock's case, the fundamentals are improving at a rate capable of justifying the stock price appreciation for the time being.
First, IBM increased in price by 0.92% since 01/30/2010 and this does not greatly impact our outlook.
Second, since our last report, there have been no significant adjustments in earnings expectations or guidance.
IBM Revenue
As a value investing shop, we are interested in seeing how IBM's revenues measure up against past performances. One easily understandable way of doing that is to compare Price to Sales per share levels over a given time frame. Assuming it is available, Ockham prefers to look at ten years of history (for this stock there are 10 years of history available) and we weigh recent years more heavily. This allows us to find weighted average historical high and low Price to Sales ratios, which give us a better idea of the stock's current underlying value. Using this method, we have established a high range for Price to Sales of 1.86x and the low end of the range at 1.23x.
With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for IBM of 1.69x is above its historical average only slightly. So, while not a major concern it is worth noting that from a value perspective IBM does not look undervalued on a Price to Sales basis. However, were the Price to Sales ratio to drop by 9% (the historical average) then we would become more positive on this stock.
IBM Cash Earnings
Looking at IBM specifically in their Cash Earnings capabilities, Ockham views IBM as below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for IBM, the current level of Cash Earnings compared to its historical levels helps identify where IBM is in relation to what the investing community was willing to pay for this level of Cash Earnings in the past. With a historical high Cash Earnings per share ratio of 12.33 and a historical low Cash Earnings per share ratio of 8.14, an investor can relate where value becomes optimal.
So what does a Cash Earnings ratio below the historical norm mean for IBM? Generally, IBM's investors have paid slightly higher stock prices for this level of Cash Earnings, which bodes well as a return to historical norms is statistically likely. However, it is never a guarantee that history gives us proper direction, particularly in fluctuating market cycles. So by utilizing a long term view and incorporating other areas of analysis (like Sales, Dividends, and management analysis), each investor can gain a more complete view of IBM. Remember, that the average Cash Earnings level for IBM has been 10.23, so the current Cash Earnings level of 8.97 is a positive in our view, but by no means is it overwhelming.
IBM Dividends
A positive Ockham rating does not require a company to pay out an inviting dividend or a dividend at all. However, we believe dividends provide a useful measure of a company's inherent expectations.
Comparable to our analysis of Sales and Cash Earnings per share, we examine dividend yields from IBM against the historic high and low levels over an available data range. Because IBM has an established history of paying a dividend to shareholders, there is value in comparing recent dividends to historical dividends. In IBM’s case, the estimated annual dividend is $2.20 producing a current dividend yield of 1.78%. The highest dividend yield from IBM in recent history was 2.73% while the lowest dividend yield was 0.44%. A current dividend yield of 12.30% above the historical median is favorable in our analysis of IBM.
Check Out Power Lunch and News on IBM
As always, the latest news on IBM is available to Ockham clients through RazorWire, and it was mentioned recently on Power Lunch.
As we analyze the results from RazorWire, one thing we do is rank each stock in terms of amount of news coverage. Recently, IBM has been less covered in the news compared to the rest of our universe of stocks. After factoring in the current fundamentals versus their historically normal ranges, we have established a Fairly Valued stance on IBM. The Motley Fool CAPS data suggests that investors believe International Business Machines Corporation will beat the market in the foreseeable future.
“… We saw coca-cola, we saw cisco and we see IBM and we see numbers that might be considered reasonably investable. To sell on that news, they have one finger on the sell button ... …”
Regulators and IBM Talked About On Zero Hedge
A regulatory entity and International Business Machines Corporation were among the topics covered on Zero Hedge and you can see more details below.
At Ockham, we rank each stock by the amount of news coverage we see from RazorWire news analytics, and International Business Machines Corporation has not seen a major ranking change recently. Crowd sentiment is favorable on this stock, as measured by the Motley Fool CAPS survey. The Ockham valuation currently has a Fairly Valued stance on IBM because it trades within the price range that we would expect given current market conditions and fundamentals.
“… These securities weren't bought or sold, like Treasuries or shares of IBM. Nor was there any market benchmark upon which the CDOs could be valued. …”
IBM News Mentioned on WSJ Marketbeat Recently
International Business Machines Corporation is one of the thousands of companies that Ockham has news analytics on, and it was recently discussed on WSJ Marketbeat.
Crowd sentiment is favorable on this stock, as measured by the Motley Fool CAPS survey. At Ockham, we rank each stock by the amount of news coverage we see from RazorWire news analytics, and International Business Machines Corporation has not seen a major ranking change recently. The Ockham valuation currently has a Fairly Valued stance on IBM because it trades within the price range that we would expect given current market conditions and fundamentals.
“… 31), IBM (-8. 24), AXP (-8. 01), CVX (-7. 94). Nasdaq Composite, down 15. 07 points, or 0. 70% to 2126. 05. S&P 500, fell 9. 45 points, or 0. 89% to. …”
News on IBM From the Pundits on Squawk On The Street
The latest news from business television and influential blogs is always available through Ockham's RazorWire, and this news is in relation to International Business Machines Corporation.
As we analyze the results from RazorWire, one thing we do is rank each stock in terms of amount of news coverage. Recently, IBM has been less covered in the news compared to the rest of our universe of stocks. After factoring in the current fundamentals versus their historically normal ranges, we have established a Fairly Valued stance on IBM. The Motley Fool CAPS data suggests that investors believe International Business Machines Corporation will beat the market in the foreseeable future.
“… You've got xerox now launching its, or IBM rather launching yet another of its own chips. Let's head over to sharon at the nymex. > > …”
International Business Machines Corporation Was Talked About by WSJ Marketbeat
As always, the latest news on IBM is available to Ockham clients through RazorWire, and it was mentioned recently on WSJ Marketbeat.
The Motley Fool CAPS data suggests that investors believe International Business Machines Corporation will beat the market in the foreseeable future. After factoring in the current fundamentals versus their historically normal ranges, we have established a Fairly Valued stance on IBM. As we analyze the results from RazorWire, one thing we do is rank each stock in terms of amount of news coverage. Recently, IBM has been less covered in the news compared to the rest of our universe of stocks.
“… 16), IBM (3. 93), WMT (3. 63), INTC (3. 48). Today’s laggers and their point contribution: BA (-6. 95), MCD (-5. 21), MMM (-5. 06), MRK (-2. 80), KO (-2. 57). …”
International Business Machines Corporation Was Talked About by Squawk On The Street
Staying informed on the news is invaluable for investors, and RazorWire has captured a recently discussion on IBM from Squawk On The Street.
International Business Machines Corporation receives our Fairly Valued rating in our latest report because the current price does not seem out of line with the fundamentals. We noticed recently that in comparison to all other stocks we analyze in the news; IBM has received less coverage from the financial media in business television and blogs. Crowd sentiment is leaning to the bearish side, according to the robust data set collected by the Motley Fool CAPS survey.
“… So if I wanted to make a bet on gm, on IBM, on you name it, in the corporate bond land, those notionals, the amount of money we play with in cds land, is similar to how much we ... …”
Stay Current on IBM's News on Zero Hedge
The latest news from business television and influential blogs is always available through Ockham's RazorWire, and this news is in relation to International Business Machines Corporation.
The Motley Fool CAPS data suggests that investors believe International Business Machines Corporation will beat the market in the foreseeable future. As we analyze the results from RazorWire, one thing we do is rank each stock in terms of amount of news coverage. Recently, IBM has been less covered in the news compared to the rest of our universe of stocks. After factoring in the current fundamentals versus their historically normal ranges, we have established a Fairly Valued stance on IBM.
“… You think this is good for John Deere, Cat, IBM, Microsoft, Apple, Boeing, Cisco or Intel? This is not good at all. It is one of the reasons the DOW is getting smacked so ... …”
The Latest News for IBM Was Just on WSJ Marketbeat
Staying informed on the news is invaluable for investors, and RazorWire has captured a recently discussion on IBM from WSJ Marketbeat.
We noticed recently that in comparison to all other stocks we analyze in the news; IBM has received less coverage from the financial media in business television and blogs. Crowd sentiment is leaning to the bearish side, according to the robust data set collected by the Motley Fool CAPS survey. International Business Machines Corporation receives our Fairly Valued rating in our latest report because the current price does not seem out of line with the fundamentals.
“… But the greatest divergence in weighting comes from IBM. The company makes up 9. 25% of the DJIA, but just 1. 69% of the S&P. …”
News Developing on WSJ Marketbeat for IBM
International Business Machines Corporation is one of the thousands of companies that Ockham has news analytics on, and it was recently discussed on WSJ Marketbeat.
Crowd sentiment is favorable on this stock, as measured by the Motley Fool CAPS survey. When taking into account the amount of news coverage each stock normally sees as a percentage of the total, International Business Machines Corporation has actually sunk a bit in comparison to the others. The Ockham valuation currently has a Fairly Valued stance on IBM because it trades within the price range that we would expect given current market conditions and fundamentals.
“… Today’s laggers and their point contribution: IBM (-20. 10), MMM (-17. 31), BA (-16. 17), CAT (-15. 04), JPM (-14. 66). Nasdaq Composite, down 65. 48 points, or 2. 99% to 2125. …”
See Who is Talking About News from IBM on Closing Bell
News has broken via the television and viral blogs regarding IBM, so investors should take an interest in learning what was said.
As we analyze the results from RazorWire, one thing we do is rank each stock in terms of amount of news coverage. Recently, IBM has been less covered in the news compared to the rest of our universe of stocks. After factoring in the current fundamentals versus their historically normal ranges, we have established a Fairly Valued stance on IBM. The Motley Fool CAPS data suggests that investors believe International Business Machines Corporation will beat the market in the foreseeable future.
“… IBM microsoft wouldn't give any strong guidance at this point. A lot of people here are actually I think preparing this for upside surprise. > > …”