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 2.88%, juxtaposed with a three-month change of 12.08%. However, fresh insights from the GuruFocus Score Rating 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.
Understanding 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: 2/10
- GF Value rank: 3/10
- Momentum rank: 9/10
Based on the above method, GuruFocus assigned International Business Machines Corp the GF Score of 69 out of 100, which signals poor future outperformance potential.
Company Snapshot: International Business Machines Corp
With a market cap of $137.32 billion and sales of $60.52 billion, International Business Machines Corp is a significant player in the software industry. The company operates in 175 countries and employs approximately 350,000 people. IBM manages 90% of all credit card transactions globally and is responsible for 50% of all wireless connections in the world, demonstrating its substantial outward impact.
Financial Strength Analysis
International Business Machines Corp's financial strength indicators present some concerning insights about the company's balance sheet health. The company's Altman Z-Score is just 2.86, which is below the safe threshold of 2.99. This suggests potential financial struggles if the Altman Z-score drops below 1.81. Additionally, the company's low cash-to-debt ratio at 0.27 indicates a struggle in handling existing debt levels. The company's debt-to-equity ratio is 2.72, which is worse than 95.1% of 2101 companies in the Software industry. A high debt-to-equity ratio suggests over-reliance on borrowing and vulnerability to market fluctuations.
Growth Prospects
A lack of significant growth is another area where International Business Machines Corp seems to falter, as evidenced by the company's low Growth rank. Over the past five years, International Business Machines Corp has witnessed a decline in its earnings before interest, taxes, depreciation, and amortization (EBITDA). The three-year growth rate is recorded at -21.7, while the five-year growth rate is at -13.8. These figures underscore potential challenges in the company's profitability.
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. While IBM has a rich history and significant market presence, these metrics suggest that it may struggle to maintain its historical performance levels. Investors should consider these factors when making investment decisions.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
