Yahoo Finance Should You Investigate International Business Machines Corporation (NYSE:IBM) At US$127?
Today we're going to take a look at the well-established International Business Machines Corporation (NYSE:IBM). The company's stock saw significant share price movement during recent months on the NYSE, rising to highs of US$137 and falling to the lows of US$121. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether International Business Machines' current trading price of US$127 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at International Business Machines’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for International Business Machines
What Is International Business Machines Worth?
According to my valuation model, International Business Machines seems to be fairly priced at around 6.58% above my intrinsic value, which means if you buy International Business Machines today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth $119.41, then there isn’t really any room for the share price grow beyond what it’s currently trading. In addition to this, International Business Machines has a low beta, which suggests its share price is less volatile than the wider market.
What kind of growth will International Business Machines generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. International Business Machines' earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? It seems like the market has already priced in IBM’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on IBM, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing International Business Machines at this point in time. Every company has risks, and we've spotted 4 warning signs for International Business Machines (of which 1 is a bit unpleasant!) you should know about.
If you are no longer interested in International Business Machines, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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 to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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