IBM Fundamental Analysis of the Stock and Bonds

As of 2017, IBM was trading lower than its peer companies owing to its declining year-over-year revenue for twenty-one quarters. Additionally, the company was not included in Wall Street’s estimates on revenues for the quarter (Waldron, 2017). However, not all was lost for IBM as its strategic imperatives revenue totaled $34.1 billion, up 11%. This figure represented 43% of all revenues, waylaying analysts’ fears of the company’s underperformance. On the other hand, cognitive solutions, technology services and cloud platforms, global financing, global business services, and systems were all down 2.5%, 5.1%, 2.2%, 3.7%, and 10.4% year-over-year respectively (Waldron, 2017). For those buying IBM to realize compounding revenue growth, they would most likely be disappointed. However, long-term investors would find it desirable as earnings and dividend are expected to continue rising for years to come.

Sometimes investors look for maximum total return, while other times they look for a growing income stream. Other investors favor safety over return, proving that a company’s analysis is dependent on what an investor seeks. A good example is where, in 2015, IBM’s dividend yield was offered at 3.7% (Carnevale, 2018). Since then, the dividend has increased annually at about 10%. Therefore, if seeking a growing income stream, IBM is a good stock to invest in. On the other hand, IBM was trading at approximately $141, while in 2018, the price was about $130. For an investor interested in long-term dividend yields, the fall in price is inconsequential. However, those seeking maximum total return would be wary of holding on to IBM or buying it.

By the quarter ending December 2018, IBM’s Return on Total Capital was 20.11, while Return on Invested Capital had reached 17.20% (Carey, 2019). This suggests that the company uses its earnings well to generate returns. Additionally, its shares outstanding were 894.26 M, making up $120.81B of the total market cap (Carey, 2019). Currently, IBM’s stock Beta value is 1.23, indicating that it is more volatile in the market (Carey, 2019), though with a Relative Strength Index (RSI) of 50.32, the stock is neither oversold nor overbought. Overall, IBM shares seem like a sound investment, depending on the kind of investor one is. Besides, Wall Street analysts expect its price to rise significantly in the next 12 months. Moreover, with its ability to generate high value from the capital it has available, most of the metrics suggest that investing in IBM would be highly beneficial.