Okay, here's a comprehensive Midas Score Card for International Business Machines Corporation (IBM) based on the data you provided and some reasonable assumptions to fill the gaps. Please note that some fields are difficult to calculate accurately without access to real-time, comprehensive financial databases. I'll use industry averages and reasonable estimates where necessary and clearly indicate where estimates are used.
Important Disclaimer: This Midas Score Card is for illustrative purposes only and should not be taken as investment advice. Always conduct thorough due diligence before making any investment decisions.
1. Overall Midas Score
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║ MIDAS SCORE: 68/100 ║
║ Rating: HOLD ║
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2. Score Breakdown
| Category | Score | Weight | Weighted |
|---|---|---|---|
| Value | 8/20 | 20% | 1.6 |
| Growth | 10/20 | 20% | 2.0 |
| Quality | 18/20 | 20% | 3.6 |
| Momentum | 17/20 | 20% | 3.4 |
| Risk | 15/20 | 20% | 3.0 |
| TOTAL | 100% | 13.6 ≈ 68/100 |
3. Value Analysis (Score: 8/20)
- P/E vs sector: 34.8x (Software sector average P/E is around 30x. This is above the average.)
- P/FCF: Requires FCF data. Assuming a high FCF, we will estimate a P/FCF ratio within the 20-25 range.
- EV/EBITDA: Requires EBITDA data.
- PEG Ratio: Requires growth estimates. With a P/E of 34.8 and assuming a modest earnings growth of 10% (estimated), the PEG ratio would be around 3.48, which is relatively high.
Justification: The high P/E ratio, without strong growth to back it up, significantly impacts the value score. Without the necessary data to calculate P/FCF, EV/EBITDA, and a reasonable PEG ratio, we must assume that the valuation is not particularly attractive, resulting in a low value score.
4. Growth Analysis (Score: 10/20)
- Revenue CAGR (3yr): Requires historical data. Let's assume a modest 3-year CAGR of 2% (IBM has struggled with revenue growth in the past).
- EPS Growth: Requires data. Let's estimate 7% annual growth based on current trends.
- AI Revenue Growth: Requires specific data. This would be a major catalyst. Assume 15% for now.
- FCF Growth: Requires data. Assume 5%.
Justification: IBM has historically struggled with high growth. Despite investments in AI, revenue growth has been slow, leading to a low growth score. The AI revenue growth is a potential boost.
5. Quality Analysis (Score: 18/20)
- ROE: 28.9% (Excellent)
- ROIC: Requires invested capital data. Let's assume ROIC is around 15%, which is good.
- Gross Margin: 58.2% (Good)
- Debt/Equity: 2.39 (High - a concern. This is not good for the quality score)
Justification: High ROE and Gross Margin contribute significantly to a high-quality score. However, the relatively high Debt/Equity ratio detracts from the score.
6. Momentum Analysis (Score: 17/20)
- 52-week performance: Requires data. Let's assume a positive 18% based on recent market performance.
- Relative to SPY: Requires data. Assume outperforming SPY by 8%.
- Analyst revisions: Requires data. Assume slightly positive revisions overall.
- Institutional flows: Requires data. Assume moderate inflows in the most recent quarter.
Justification: If the stock has been performing well over the past year, outperforming the S&P 500, and seeing positive analyst revisions and institutional inflows, the momentum score is high.
7. Risk Analysis (Score: 15/20)
- Beta: 0.698 (Low - good)
- Volatility: Requires data. Assume below average for its sector, given its Beta.
- Downside risk: Requires complex analysis, but with lower Beta, should be moderate.
- Credit rating: Requires data. Assume investment grade (e.g., A or higher).
Justification: The low beta reduces the risk score. Assuming an investment-grade credit rating and moderate downside risk further supports a decent risk score.
8. Peer Comparison (Estimated)
Important notes:
- The Midas scores for peer stocks are estimates.
- MSFT generally has stronger growth and quality metrics, resulting in a higher Midas Score.
9. Investment Verdict
Midas Rating: 68/100 → HOLD
Explanation:
- IBM has strengths in Quality (high ROE and margins) and reasonably good Risk. However, its Value is questionable due to a higher P/E ratio coupled with slow growth.
- A "Hold" rating reflects the mixed signals. Investors might hold if they value IBM's stability, but growth-oriented investors might look elsewhere.
- The data gaps highlight the limitations of this simplified analysis and the importance of comprehensive research.
Key improvements needed to make this a stronger "BUY" recommendation:
- Accelerated revenue and earnings growth. Especially in high-margin areas like cloud and AI.
- Debt reduction. A lower Debt/Equity ratio would significantly improve the "Quality" score.
- Improved valuation metrics. A lower P/E ratio relative to growth, along with strong free cash flow generation.
Remember this is based on estimates and limited data. More detailed financial analysis, industry trends, and competitive positioning would be required for a high-conviction investment decision.