International Business Machines Corporation (NYSE:IBM) received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$138 at one point, and dropping 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$131 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.
What’s The Opportunity In International Business Machines?
According to my valuation model, International Business Machines seems to be fairly priced at around 8.97% 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 the company’s true value is $120.52, then there isn’t really any room for the share price grow beyond what it’s currently trading. What’s more, International Business Machines’s share price may be more stable over time (relative to the market), as indicated by its low beta.
What does the future of International Business Machines look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. With profit expected to more than double over the next couple of years, the future seems bright for International Business Machines. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
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 financial strength of the company. 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 tabs on IBM, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect 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. For instance, we’ve identified 4 warning signs for International Business Machines (1 is concerning) you should be familiar with.
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.
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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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