Wisdom is never on the menu, you have to own the restaurant. Carrie Latet
International Business Machines Corporation (IBM), founded in 1911, provides information technology products and services worldwide. It operates in five segments: Global Technology Services, Global Business Services, Software, Systems and Technology and Global Financing. It operates in 170 countries and roughly 65% of its workforce is located outside the United States.
We like IBM (IBM) for the following reasons:
- A very strong levered free cash flow of $12.1 billion
- Net income has increased from 13.4 billion in 2009 to $15.8 billion in 2011
- A decent quarterly earnings growth rate of 7.1%
- Operating margins of 20%
- EBITDA has increased from $5.5 billion in 2009 to $26.2 billion in 2011
- Cash flow per share has increased from $14.02 in 2009 to $17.82 in 20111
- Annual EPS before NRI has almost doubled from $7.13 in 2007 to $13.38 in 2011
- A very low payout ratio of 22%
- A great 5 year average payout ratio of 23%
- A strong 5 year dividend growth rate of 15.75%
- It has been returning cash to shareholders for dividends for over 10 years. Since 2000 it has returned over $133 billion to shareholders in through dividend payments and share repurchases
- In 2011, it returned approximately $18.5 billion through dividends and share repurchases. $3.5 billion of this amount was used towards share repurchases
- A projected 3-5 year estimated EPS growth rate of 10%
- A very good 5 year ROE average of 60.8%
- A good current and quick ratio of 1.28 and 1.15 respectively
- A splendid interest coverage ratio of 35.8
- Year over year estimated growth rates of 12.24 and 9.96% for 2012 and 2013 respectively.
- Management has stated that they plan to purchase $50 billion in shares over the next 5 years
- Its cost cutting efforts are paying off and are now contributing to the bottom line. These initiatives helped IBM generate savings of $6 billion in from 2007-2011. It expects to save another $8 billion by 2015 based on improving overall efficiency which will contribute approximately $5 billion to the bottom line.
- $100K invested for 10 years would have grown to $286K; if the dividends were reinvested the rate of return would be much higher
Company: International Business Machines
Basic Key ratios
- Percentage Held by Insiders = 0.09
- Number of Institutional Sellers 12 Weeks = 15
Growth
- Net Income ($mil) 12/2011 = 15855
- Net Income ($mil) 12/2010 = 14833
- Net Income ($mil) 12/2009 = 13425
- 12months Net Income this Quarterly/12 months Net Income 4Q's ago = 6.39
- Quarterly Net Income this Quarterly/same Quarter year ago = 7.09
- EBITDA ($mil) 12/2011 = 26229
- EBITDA ($mil) 12/2010 = 24922
- EBITDA ($mil) 12/2009 = 23534
- Annual Net Income this Yr/ Net Income last Yr = 6.89
- Cash Flow ($/share) 12/2011 = 17.82
- Cash Flow ($/share) 12/2010 = 15.83
- Cash Flow ($/share) 12/2009 = 14.02
- Sales ($mil) 12/2011 = 106916
- Sales ($mil) 12/2010 = 99870
- Sales ($mil) 12/2009 = 95758
- Annual EPS before NRI 12/2007 = 7.13
- Annual EPS before NRI 12/2008 = 8.93
- Annual EPS before NRI 12/2009 = 10.01
- Annual EPS before NRI 12/2010 = 11.52
- Annual EPS before NRI 12/2011 = 13.38
Dividend history
- Dividend Yield = 1.44
- Dividend Yield 5 Year Average 12/2011 = 1.73
- Dividend Yield 5 Year Average 09/2011 = 1.73
- Annual Dividend 12/2011 = 2.9
- Annual Dividend 12/2010 = 2.5
- Forward Yield = 1.64
- Dividend 5 year Growth 12/2011 = 15.75
Dividend sustainability
- Payout Ratio 09/2011 = 0.22
- Payout Ratio 06/2011 = 0.22
- Payout Ratio 5 Year Average 12/2011 = 0.23
- Payout Ratio 5 Year Average 09/2011 = 0.23
- Payout Ratio 5 Year Average 06/2011 = 0.23
- Change in Payout Ratio = -0.01
Performance
- Percentage Change Price 52 Weeks Relative to S&P 500 = 16.99
- Next 3-5 Year Estimate EPS Growth rate = 10.05
- EPS Growth Quarterly(1)/Q(-3) = -120.35
- 5 Year History EPS Growth 12/2011 = 16.74
- 5 Year History EPS Growth 09/2011 = 16.74
- ROE 5 Year Average 12/2011 = 60.88
- Return on Investment 12/2011 = 36.61
- Debt/Total Cap 5 Year Average 12/2011 = 49.96
- Current Ratio 12/2011 = 1.28
- Current Ratio 09/2011 = 1.28
- Current Ratio 06/2011 = 1.21
- Current Ratio 5 Year Average = 1.18
- Quick Ratio = 1.15
- Cash Ratio = 1.11
- Interest Coverage Quarterly = 35.87
Valuation
- Book Value Quarterly = 17.94
- Price/ Book = 11.6
- Price/ Cash Flow = 11.67
RELATED COMPANIES
Related companies data obtained from barchart.com. An explanation for many of the key ratios here was covered in this article 5 Top Rated Relative Strength Plays.
For investors looking for other ideas some data has been provided on four additional companies to get you started. If you are looking for more ideas then consider reading this article 5 Prospective Long-Term Growth Candidates To.
Mentor Graphics Corp. (MENT)
Levered Free Cash Flow: $94.7 Million
Net income for the past three years
Net Income 2009 = $- 21 million
Net Income 2010 = $ 28 million
Net Income 2011 = $ 83 million
Profit margins = 8.2%
Operating margins = 12.1%
Quarterly revenue growth = 4.2%
Quarterly earnings growth = 14.3%
Total cash flow from operating activities
2009 = $ 37 million
2010 = $ 82 million
2011 = $ 103 million
Gross Profit for past 3 years
2009 = $ 668 million
2010 = $ 758 million
2011 = $ 841 million
Dividend yield 5 year average = N/A
Dividend growth rate 5 year average = N/A
Payout Ratio = N/A
5 year sales growth= 4.01%
Current Ratio = 1.4
Quick Ratio = 1.5
Long term debt to equity= 0.25
Interest Coverage = 3.6
MICROS Systems, Inc. (MCRS)
Levered Free Cash Flow: N/A
Net income for the past three years
Net Income 2009 = $ 96 million
Net Income 2010 = $ 114 million
Net Income 2011 = $ 144 million
Profit margins = 14%
Operating margins = 21%
Quarterly revenue growth = 9.8%
Quarterly earnings growth = 12%
Total cash flow from operating activities
2009 = $ 165 million
2010 = $ 201 million
2011 = $ 199 million
Gross Profit for past 3 years
2009 = $ 482 million
2010 = $ 501 million
2011 = $ 560 million
Dividend yield 5 year average = N/A
Dividend growth rate 5 year average = N/A
Payout Ratio = N/A
5 year sales growth= 5.26%
Current Ratio = 2.7
Quick Ratio = 3.00
Long term debt to equity= 0.00
Interest Coverage = 330
Diebold, Incorporated (DBD)
Levered Free Cash Flow: $170 million
Net income for the past three years
Net Income 2009 = $ 36 million
Net Income 2010 = $- 20 million
Net Income 2011 = $ 144 million
Profit margins = 6.4%
Operating margins = 8.1%
Quarterly revenue growth = 13.7%
Quarterly earnings growth = N/A
Total cash flow from operating activities
2009 = $ 296 million
2010 = $ 273 million
2011 = $ 215 million
Gross Profit for past 3 years
2009 = $615 million
2010 = $ 719 million
2011 = $ 735 million
Dividend yield 5 year average = 3.5
Dividend growth rate 5 year average = 4.55
Payout Ratio = 39%
5 year sales growth= - 1.1
Current Ratio = 1.10
Quick Ratio = 2.10
Long term debt to equity= 0.69
Interest Coverage = 7.40
NCR Corp. (NCR)
Levered Free Cash Flow: $147 million
Net income for the past three years
Net Income 2009 = $- 33 million
Net Income 2010 = $134 million
Net Income 2011 = $53 million
Profit margins = 1.23%
Operating margins = 3.8%
Quarterly revenue growth = 13.6%
Quarterly earnings growth = 123%
Total cash flow from operating activities
2009 = $ 260 million
2010 = $ 247 million
2011 = $ 375 million
Gross Profit for past 3 years
2009 = $880 million
2010 = $ 960 million
2011 = $ 1.13 billion
Dividend yield 5 year average = N/A
Dividend growth rate 5 year average = N/A
Payout Ratio = N/A
5 year sales growth= - 1.41
Current Ratio = 0.9
Quick Ratio = 1.60
Long term debt to equity= 0.96
Interest Coverage = 4.40
Conclusion
Why we like IBM, the company is overbought right now. Investors would be best served by waiting for a pullback before committing fresh money into it.
Disclaimer
This list of stocks is meant to serve as a starting point. Please do not treat this as a buying list. It is imperative that you do your due diligence and then determine if any of the above plays meet with your risk tolerance levels. The Latin maxim caveat emptor applies - let the buyer beware.
Additional disclosure: Pie graphs of 2011 Revenue segments and Revenue by geography supplied courtesy of Zacks.com. Earnings estimate and growth rates table sourced from dailyfinance.com. EPS and EPS surprise charts obtained from zacks.com. A major portion of the historical data used in this article was obtained from zacks.com.
