Long-established in the software industry, International Business Machines Corp (IBM, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 2.06%, juxtaposed with a three-month change of 14.68%. However, fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of International Business Machines Corp.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 5/10
- Profitability rank: 7/10
- Growth rank: 5/10
- GF Value rank: 1/10
- Momentum rank: 6/10
Based on the above method, GuruFocus assigned International Business Machines Corp the GF Score of 68 out of 100, which signals poor future outperformance potential.
Understanding International Business Machines Corp Business
Incorporated in 1911, International Business Machines, or IBM, is one of the oldest technology companies in the world. It provides software, IT consulting services, and hardware to help business customers modernize their technology workflows. IBM operates in 175 countries and employs approximately 300,000 people. The company has a robust roster of business partners to service its clients, which includes 95% of all Fortune 500 companies. IBM's products, including Red Hat, watsonx, and mainframes, handle some of the world's most important data workloads in areas like finance and retail.
Financial Strength Breakdown
International Business Machines Corp's financial strength indicators present some concerning insights about the company's balance sheet health. Additionally, the company's low cash-to-debt ratio at 0.26 indicates a struggle in handling existing debt levels.
The company's debt-to-equity ratio is 2.49, which is worse than 95.12% of 2,211 companies in the Software industry. A high debt-to-equity ratio suggests over-reliance on borrowing and vulnerability to market fluctuations.
Additionally, the company's debt-to-Ebitda ratio is 5.42, which is above Joel Tillinghast's warning level of 4 and is worse than 86.19% of 1,687 companies in the Software industry. Tillinghast said in his book “Big Money Think's Small: Biases, Blind Spots, and Smarter Investing” that a high debt-to-Ebitda ratio can be a red flag unless tangible assets cover the debt.
Conclusion
International Business Machines Corp's financial strength, profitability, and growth metrics, as highlighted by the GF Score, underscore the firm's potential for underperformance. While the company has a rich history and a significant presence in the technology sector, its current financial indicators suggest challenges ahead. Investors should consider these factors when evaluating IBM's future prospects. For those seeking companies with strong GF Scores, GuruFocus Premium members can explore more options using the following screener link: GF Score Screen.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
