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TheStreet Open House

Warren Buffett's 10 Favorite Growth Stocks

Stocks in this article: IBMCOSTKOJNJAXP

4. International Business Machines (IBM)

10-Year EBITDA Growth Rate:  12.60%

Warren Buffett's Portfolio Weighting at of 12-31-2013:  12.2%

Value of Holdings:  $12.778 billion

International Business Machines (IBM) creates business value for clients as well as solves business problems through integrated solutions that leverage information technology and knowledge of business processes. IBM operates in five segments: Global Technology Services, Global Business Services, Software, Systems and Technology and Global Financing.

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TheStreet Ratings team rates INTL BUSINESS MACHINES CORP as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate INTL BUSINESS MACHINES CORP (IBM) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, expanding profit margins, good cash flow from operations, increase in net income and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • INTL BUSINESS MACHINES CORP has improved earnings per share by 11.7% in the most recent quarter compared to the same quarter a year ago. 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 $15.02 versus $14.41 in the prior year. This year, the market expects an improvement in earnings ($18.00 versus $15.02).
  • The gross profit margin for INTL BUSINESS MACHINES CORP is rather high; currently it is at 56.58%. 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 22.32% trails the industry average.
  • Net operating cash flow has slightly increased to $6,528.00 million or 2.86% when compared to the same quarter last year. Despite an increase in cash flow, INTL BUSINESS MACHINES CORP's cash flow growth rate is still lower than the industry average growth rate of 18.26%.
  • The net income growth from the same quarter one year ago has exceeded that of the IT Services industry average, but is less than that of the S&P 500. The net income increased by 6.0% when compared to the same quarter one year prior, going from $5,833.00 million to $6,184.00 million.
  • Despite the weak revenue results, IBM has outperformed against the industry average of 20.4%. Since the same quarter one year prior, revenues slightly dropped by 5.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • You can view the full analysis from the report here: IBM Ratings Report

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