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International Business Machines Corp Stock Buy Recommendation Reiterated (IBM)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK (TheStreet) -- International Business Machines (NYSE:IBM) has been reiterated by TheStreet Ratings as a buy with a ratings score of A. The company's strengths can be seen in multiple areas, such as its notable return on equity, growth in earnings per share and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

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Highlights from the ratings report include:

  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the IT Services industry and the overall market, INTL BUSINESS MACHINES CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • INTL BUSINESS MACHINES CORP's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, INTL BUSINESS MACHINES CORP increased its bottom line by earning $14.41 versus $13.12 in the prior year. This year, the market expects an improvement in earnings ($16.70 versus $14.41).
  • The gross profit margin for INTL BUSINESS MACHINES CORP is rather high; currently it is at 50.30%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 12.95% trails the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 13.8%. Since the same quarter one year prior, revenues slightly dropped by 5.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Net operating cash flow has declined marginally to $4,000.00 million or 6.78% when compared to the same quarter last year. Despite a decrease in cash flow INTL BUSINESS MACHINES CORP is still fairing well by exceeding its industry average cash flow growth rate of -33.50%.

International Business Machines Corporation provides information technology (IT) products and services worldwide. The company operates in five segments: Global Technology Services, Global Business Services, Software, Systems and Technology, and Global Financing. International Business Machines has a market cap of $221.3 billion and is part of the technology sector and computer software & services industry. The company has a P/E ratio of 14.00, below the S&P 500 P/E ratio of 18.00. Shares are up 5.7% year to date as of the close of trading on Thursday.

You can view the full International Business Machines Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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