International Business Machines Corporation (IBM)
Valuation Overview•Is International Business Machines Corporation Overvalued or Undervalued?
Commands a peer premium multiple, but this multiple is justified by a strong intrinsic cash flow value.
Moderate quality score of 61/100, reflecting stable operating margins and manageable leverage.
Analysts remain bullish, forecasting further upside expansion with consensus targets suggesting solid gains.
Verdict: Solid fundamental quality, though solvency presents a headwind.
Wall Street is highly bullish, projecting significant upside alongside robust expected earnings growth. This is paired with healthy capital returns, anchored by a strong, well-covered dividend yield.
IBM demonstrates strong business quality with robust profitability and healthy margins. However, this is severely offset by a highly leveraged balance sheet (Debt/EBITDA > 4.0x) and elevated financial risk.
The company exhibits steady, low-single-digit revenue growth paired with highly explosive earnings growth (83.8% EPS 3Y CAGR). The company maintains healthy operational efficiency with a 16.4% operating margin.
| Financial Metric | Trend (12Q) | Latest Qtr | 1Y Growth | 3Y CAGR | 5Y CAGR | 10Y CAGR |
|---|---|---|---|---|---|---|
| Revenue | $15.9B | +7.6% | +3.7% | +4.1% | -1.9% | |
| EBITDA | $1.3B | — | +5.8% | — | — | |
| Net Income | $1.2B | +75.9% | +86.2% | — | -2.2% | |
| EPS (Diluted) | $1.28 | +73.7% | +83.8% | +12.4% | -1.8% | |
| Free Cash Flow | $4.8B | -1.6% | +11.0% | -5.0% | — |
| Metric | TTM | 3Y Avg | 5Y Avg | 10Y Avg |
|---|---|---|---|---|
| Gross Margin | 59.0% | 57.2% | 56.1% | 53.2% |
| Operating Margin | 16.4% | 15.7% | 14.5% | 14.6% |
| Net Margin | 15.6% | 12.5% | 10.0% | 11.0% |
| FCF Margin | 19.0% | 18.5% | 17.4% | 18.1% |
| Quarter | EPS Est. | EPS Act. | Surprise | EPS | Rev |
|---|---|---|---|---|---|
| Q2'26Latest | $1.81 | $1.91 | +5.5% | ||
| Q1'26 | $4.31 | $4.52 | +4.9% | ||
| Q4'25 | $2.45 | $2.65 | +8.2% | ||
| Q3'25 | $2.65 | $2.80 | +5.7% | ||
| Q2'25 | $1.42 | $1.60 | +12.7% | ||
| Q1'25 | $3.77 | $3.92 | +4.0% | ||
| Q4'24 | $2.22 | $2.30 | +3.6% | ||
| Q3'24 | $2.20 | $2.43 | +10.5% |
Total return is -9.7% (1Y), lagging the benchmark by -34.7%
| Period | Total Return | vs S&P 500 (Alpha) | Dividend Contribution |
|---|---|---|---|
| YTD | -13.4% | -22.7% | — |
| 1Y | -9.7% | -34.7% | +2.4% |
| 3YCAGR | +25.6% | +8.1% | +14.8% |
| 5YCAGR | +15.6% | +3.8% | +24.3% |
| 10YCAGR | +7.8% | -5.2% | — |
The S&P 500 is at 31.3x trailing P/E — Expensive relative to historical averages.
Quick answers to common questions about International Business Machines Corporation (IBM) valuation, health, and returns.
International Business Machines Corporation is estimated to be undervalued under our discounted cash flow framework. relative multiples indicate the stock is Expensive versus peers compared to industry peers. undervalued (implying +44.5% upside to DCF intrinsic value of $359.96)
International Business Machines Corporation has multiple valuation anchors: DCF Intrinsic Value: $359.96 | Peer Relative Fair Value: $115.21 | Wall Street Analyst Target: $311.33 (implying +25.0% upside). A convergence of these signals offers higher conviction.
International Business Machines Corporation displays good financial health with a composite quality score of 61/100, supported by a Altman Z-Score of 2.6 (grey zone), Piotroski F-Score of 5/9, Return on Invested Capital (ROIC) of 9.8%.
International Business Machines Corporation pays a 2.6% dividend yield, covered by a 59% payout ratio with 30 years of growth, supplemented by a 0.0% buyback yield.
International Business Machines Corporation's current growth trajectory is Accelerating. The company achieved +7.6% 1Y revenue growth and +73.7% 1Y EPS growth, compared to its 3Y revenue CAGR of +3.7%.
Wall Street consensus is Hold based on 50 analysts, beating EPS expectations in 100% of recent quarters with a 13-quarter streak. The consensus price target represents a +25.0% change from current levels.
Investment risks for International Business Machines Corporation include: -31.9% 1-year max drawdown. Volatility risk is characterized by a beta of 1.05x.
No. These computations are purely quantitative model outputs for informational purposes. They do not account for qualitative management shifts or macro events. Always consult a licensed RIA before buying or selling shares.
Disclaimer: This page is for informational purposes only and does not constitute financial advice. All valuation models, scores, and target estimates are automated computations under stated assumptions and should not be relied upon as the sole basis for any investment decision.