Why IBM Stock is Rated a 'Hold with Caution' Today
IBM (NYSE: IBM) is a $153 billion company today. Investors that bought shares one year ago are sitting on a 16.28% total return. That's above the S&P 500's return of 13.69%.
IBM stock is beating the market, but does that make it a good buy today? To answer this question we've turned to the Investment U Stock Grader. Our research team built this system to diagnose the financial health of a company.
Our system looks at six key metrics...
Earnings-per-Share (EPS) Growth: IBM reported a recent EPS growth rate of -11%. That's below the IT services industry average of 14.3%. That's not a good sign. We like to see companies that have higher earnings growth.
Price-to-Earnings (P/E): The average price-to-earnings ratio of the IT services industry is 25.46. And IBM's ratio comes in at 12.33. It's trading at a better value than many of its competitors.
Debt-to-Equity : The debt-to-equity ratio for IBM stock is 231.9. That's above the IT services industry average of 133.1. That's not a good sign. IBM's debt levels should be lower.
Free Cash Flow per Share Growth : IBM's FCF has been lower than its competitors over the last year. That's not good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It's one of our most important fundamental factors.
Profit Margins : The profit margin of IBM comes in at 9.64% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. IBM's profit margin is below the IT services average of 11.76%. So that's a negative indicator for investors.
Return on Equity : Return on equity tells us how much profit a company produces with the money shareholders invest. The ROE for IBM is 69.82%, and that's above its industry average ROE of 24.46%.
IBM stock passes two of our six key metrics today. That's why our Investment U Stock Grader rates it as a hold with caution.
Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That's why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth. For more details, click here.
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