Today we’ll take a look at the well-established International Business Machines Corporation (NYSE:IBM). The company’s shares have received a lot of attention due to the significant price increase on the NYSE in the past few months. As a large-cap stock with high analyst coverage, you might assume that any recent changes in the company’s outlook have already been factored into the stock price. However, can the stock still trade at a relatively low price? Let’s take a closer look at International Business Machines’ valuation and outlook to see if there’s still a good opportunity.
Check out our latest analysis for International Business Machines
Are international business machines still cheap?
The stock appears to be fairly valued at the moment according to my valuation model. It’s trading about 15% below my intrinsic value, which means if you were to buy International Business Machines today, you’d pay a reasonable price for it. And if you believe the company’s true value is $171.62, then there isn’t much room for the stock price to rise above where it’s currently trading. Moreover, International Business Machines’ share price may be more stable over time (relative to the market), as shown by its low beta value.
What does the future of International Business Machines look like?
Investors looking for growth in their portfolio may want to consider the company’s prospects before buying its stock. While value investors would argue that intrinsic value over price is most important, a more compelling investment thesis would be high growth potential at a low price. International Business Machines’ earnings are expected to double in the next few years, indicating a very optimistic future. This should lead to stronger cash flows, which will lead to a higher stock value.
What does this mean for you?
Are you a shareholder? IBM’s optimistic future growth appears to be factored into the current share price, with the stock trading around its fair value. However, there are other important factors that we have not taken into account today, such as the past performance of his management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy if the price oscillates below the true value?
Are you a potential investor? If you’ve been following IBM, now might not be the best time to buy, given that it’s trading around its fair value. However, the optimistic outlook is encouraging for the company, which means it is worth further examining other factors such as balance sheet strength to take advantage of the next drop in price.
If you want to dive deeper into International Business Machines, you should also look at what risks it is currently facing. For example, International Business Machines has 5 warning signs (and 1 that makes us a bit embarrassed) we think you should know.
If you are no longer interested in International Business Machines, you can use our free platform to view our list of over 50 other stocks with high growth potential.
What are the risks and opportunities for International business machines?
International Business Machines Corporation offers integrated solutions and services worldwide.
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It is trading 15.4% below our fair value estimate
Earnings are projected to grow 71.29% annually
The debt is not well covered by operating cash flow
Significant insider sales in the last 3 months
Profit margins (2.3%) are lower than last year (4.6%)
Large non-recurring items affecting financial results
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our goal is to provide you with long-term focused analysis driven by fundamental data. Please note that our analysis may not take into account the company’s latest price-sensitive announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.