International Business Machines Valuation

Q: What is the Fair Price of IBM when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

IBM (CA$34.7) is trading below our estimate of [[fair value]] (CA$49.27)

Is IBM undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

5/6

Valuation Score 5/6

Below Fair Value
Significantly Below Fair Value
Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Analyst Forecast

Share Price vs Fair Value

What is the Fair Price of IBM when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: IBM (CA$34.7) is trading below our estimate of fair value (CA$49.27)

Significantly Below Fair Value: IBM is trading below fair value by more than 20%.

Key Valuation Metric

Which metric is best to use when looking at relative valuation for IBM?

Key metric: As IBM is profitable we use its Price-To-Earnings Ratio for relative valuation analysis.

The above table shows the Price to Earnings ratio for IBM. This is calculated by dividing IBM's market cap by their current earnings.
What is IBM's PE Ratio?
PE Ratio	32.8x
Earnings	US$6.37b
Market Cap	US$206.17b

IBM key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	4x
Enterprise Value/EBITDA	17.2x
PEG Ratio	3.1x

Price to Earnings Ratio vs Peers

How does IBM's PE Ratio compare to its peers?

The above table shows the PE ratio for IBM vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	Forward PE	Estimated Growth	Market Cap
Peer Average	51x
GIB.A CGI	21x	7.2%	CA$35.5b
CSU Constellation Software	119x	26.6%	CA$97.7b
ACN Accenture	31.1x	9.5%	US$224.1b
TCS Tata Consultancy Services	32.9x	10.1%	₹15.6t
IBM International Business Machines	32.8x	10.5%	CA$206.2b

Price-To-Earnings vs Peers: IBM is good value based on its Price-To-Earnings Ratio (32.8x) compared to the peer average (50.8x).

Price to Earnings Ratio vs Industry

How does IBM's PE Ratio compare vs other companies in the North American IT Industry?

6 Companies	Price / Earnings	Estimated Growth	Market Cap

6 Companies		Estimated Growth	Market Cap

No more companies

Price-To-Earnings vs Industry: IBM is good value based on its Price-To-Earnings Ratio (32.8x) compared to the North American IT industry average (39.2x).

Price to Earnings Ratio vs Fair Ratio

What is IBM's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

IBM PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	32.8x
Fair PE Ratio	75.1x

Price-To-Earnings vs Fair Ratio: IBM is good value based on its Price-To-Earnings Ratio (32.8x) compared to the estimated Fair Price-To-Earnings Ratio (75.1x).

Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Insufficient data to show price forecast.

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