Is IBM a good investment for the long term or not.Perhaps it is one of a few "fairly valued" companies in this market at the moment.
IBM stock has plunged by 16% in the last 12 months, and gained 9% by under performing the S&P index 500.however, after that douse, majority of shareholders may be speculating I the stock quotes of IBM is valuable long term buy or not.
During the past year, IBM sprawling price to earnings has vary in the range of 11.5 too 15.5.at the moment, it currently stood at 13x, which makes it cheaper than that of industry fellows Accenture and Microsoft , which were trading at 19x and 17x times respectively. It is somewhat higher than Hewlett Packard with price to earnings ratio of 12.5. But, the company stock is still trading at S&P 500 on discount which is 19 times.
The company’s did not have high expectations regarding its earnings in future. According to Thomson Reuter’s projection, company’s five years price to growth ratio is 2.2, which is similar to Microsoft’s. HP and Accenture PEG ratio is slightly less than IBMs and Microsoft’s of 2.1 and 1.9.However, all these statistics related to ratios shows that none of these companies will be able to report stable earnings growth in the coming years.
The New York based company vital asset is its increasing cloud business that helped the company to grow its revenue by 60% annually to almost $7 billion in last year.
In the year 2013, Softlayer Tech –a cloud computing firm was acquired by IBM for around $2 billion.
In 2014, it also bought Lighthouse security group and CrossIdeas companies. IBM spent $1.2 billion to extend its cloud business along with the development of its Watson Group. Ginni Rometty Chief Executive Officer of IBM thinks that Watson group is going to develop into a $10 billion worth of a company in the coming years.
The Tech giant company enters into a joint venture with Apple. IBM is looking to launch applications for businesses and cloud computing on iOS, which will be built-in on iPads.
In spite of the company’s potential development in cloud business, it only accounts for 7.5% in last year’s revenue.
Company’s worldwide sales have plunged continuously for 11 quarters in a row. During the previous quarter, business and technology services, software and technology sector business have tumbled on year over year basis. Company believes that the reason for this decline in demand was less client spending, strengthening US dollar, and divestment of businesses with lower profits.
One of the major problem which has troubled the company was promise of Former CEO of increasing the yearly EPS to $20 from $10.01.IBM assertively buy back its share, cut jobs, reduced lower margin company’s and was not successful in putting investment in high margin business. That perhaps intolerant strategy grounds IBM's growth to fall.
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