International Business Machines Corporation (IBM) Stock Analysis — Fair Value, Risk & Moat Rating
NYQ · Technology · Information Technology Services
Is International Business Machines Corporation a safe investment right now?
International Business Machines Corporation's Altman Z-Score of 3.31 places it in the safe zone. Our DCF model estimates intrinsic value at $306.11, suggesting the stock may be undervalued by 17%. Moat rating: 3.5/5 stars.
Could International Business Machines Corporation go bankrupt? Altman Z-Score analysis
Z-Score of 3.31 is above 3.0, indicating the company is financially healthy by this metric.
- Below 1.8 — Distress Zone (high bankruptcy risk)
- 1.8 to 3.0 — Gray Zone (elevated uncertainty)
- Above 3.0 — Safe Zone (financially healthy)
What drives IBM's Z-Score?
| Component | Formula | Value | Weight | Contribution |
|---|---|---|---|---|
| A · Working Capital / Total Assets | WC / TA | 0.0098 | 1.2 | 0.01 |
| B · Retained Earnings / Total Assets | RE / TA | 1.102 | 1.4 | 1.54 |
| C · EBIT / Total Assets | EBIT / TA | 0 | 3.3 | 0.0 |
| D · Market Cap / Total Liabilities | MCap / TL | 2.1687 | 0.6 | 1.3 |
| E · Revenue / Total Assets | Rev / TA | 0.451 | 1.0 | 0.45 |
How has IBM's financial health changed over time?
| Year | Z-Score | Zone |
|---|---|---|
| 2016 | 4.11 | Safe |
| 2017 | 4.2 | Safe |
| 2018 | 3.96 | Safe |
| 2019 | 3.86 | Safe |
| 2020 | 3.59 | Safe |
| 2021 | 2.93 | Gray |
| 2022 | 2.97 | Gray |
| 2023 | 3.43 | Safe |
| 2024 | 3.27 | Safe |
| 2025 | 3.31 | Safe |
Source: Calculated from IBM's latest 10-K filing on SEC EDGAR.
What is International Business Machines Corporation actually worth?
Fair value range: $198.88 — $346.80
Valuation Methods
| Method | Fair Value | Weight | Detail |
|---|---|---|---|
| Historical PE × Forward EPS | $346.80 | 50% | 25.9x avg PE (4 years) × $13.39 forward EPS |
| DCF (Discounted Cash Flow) | $309.78 | 30% | Two-stage DCF: $13.2B TTM FCF, 5.3% growth, 7.2% WACC |
| EV/FCF Multiple | $198.88 | 20% | TTM FCF × 18x multiple + net cash |
Assumptions & Data Sources
| Parameter | Value | Source |
|---|---|---|
| FCF Growth Rate (Stage 1) | 5.3% | 70% analyst consensus + 30% historical |
| Analyst EPS Growth (This Year) | 6.6% | Consensus (20 analysts) |
| Analyst EPS Growth (Next Year) | 8.3% | Consensus |
| Historical 5Y FCF CAGR | 0.4% | SEC EDGAR |
| Terminal Growth Rate | 2.5% | Long-term GDP proxy |
| Discount Rate (WACC) | 7.2% | CAPM (Rf=4.3% + 0.69*5.5%) |
| Net Cash / (Debt) | $-50,190M | Balance sheet |
| Base FCF (TTM) | $13.2B | Trailing 12 months |
| Shares Outstanding | 938,409,072 | Latest |
Sensitivity Analysis
| Growth Rate | 8% WACC | 10% WACC | 7.2% WACC | 13% WACC |
|---|---|---|---|---|
| 0% | $225.69 | $166.79 | $263.23 | $120.34 |
| 2.5% | $261.28 | $191.61 | $305.76 | $136.86 |
| 5.0% | $302.12 | $219.98 | $354.63 | $155.63 |
| 7.5% | $357.83 | $258.05 | $421.75 | $180.26 |
Free Cash Flow History
| Year | FCF | Growth |
|---|---|---|
| 2016 | $13.1B | — |
| 2017 | $13.7B | +4.2% |
| 2018 | $13.5B | +-1.2% |
| 2019 | $13.5B | +-0.2% |
| 2020 | $11.9B | +-12.2% |
| 2021 | $12.5B | +5.3% |
| 2022 | $15.6B | +24.8% |
| 2023 | $10.7B | +-31.1% |
| 2024 | $9.1B | +-15.3% |
| 2025 | $12.7B | +39.6% |
Source: FCF data from SEC EDGAR filings. Price via Yahoo Finance.
Does International Business Machines Corporation have a durable competitive advantage?
Moat rating: 3.5/5.
What makes up IBM's moat score?
ROIC Stability
ROIC variability over the past decade. Score: 2/5.
Gross Margin Trend
Gross margin trajectory over the past decade. Score: 5/5.
Switching Costs
Estimated customer lock-in based on margin level. Score: 4/5.
How stable is IBM's return on invested capital?
No ROIC history available.
| Year | ROIC | Trend |
|---|
Source: ROIC calculated from SEC EDGAR filings.
Is International Business Machines Corporation's dividend safe?
Can International Business Machines Corporation afford its dividend?
Payout ratio is 60.2%. FCF covers the dividend 3.5x. 65 consecutive years of payments.
International Business Machines Corporation's key financial metrics
| Metric | Latest | 1Y Ago | 3Y Ago | Trend |
|---|---|---|---|---|
| Revenue | $61.9B | $60.5B | $55.2B | Rising |
| Net Income | $7.5B | $1.6B | $5.6B | Rising |
| Free Cash Flow | $12.7B | $9.1B | $15.6B | Declining |
| Gross Margin | 55.5% | 54.0% | 55.9% | Stable |
Common questions about International Business Machines Corporation
Is International Business Machines Corporation at risk of going bankrupt?
International Business Machines Corporation's Altman Z-Score of 3.31 places it in the safe zone. This metric uses balance sheet ratios to predict bankruptcy probability within 2 years. A score below 1.8 signals distress, while above 3.0 indicates safety.
What is International Business Machines Corporation's intrinsic value based on DCF?
Our DCF model estimates International Business Machines Corporation's intrinsic value at $306.11 per share. The current margin of safety is 17.1%. This estimate is based on historical free cash flow trends and a risk-adjusted discount rate.
Does International Business Machines Corporation have a competitive moat?
International Business Machines Corporation receives a moat rating of 3.5 out of 5 stars, based on ROIC stability, gross margin trends, and estimated switching costs. A rating above 3.5 suggests a durable competitive advantage.
Is International Business Machines Corporation's dividend safe?
Our dividend safety analysis examines payout ratio, free cash flow coverage, and the company's streak of consecutive dividend payments to determine whether the current payout is sustainable.
Before you invest in International Business Machines Corporation, make sure you truly understand it.
A deep understanding of a company's fundamentals, risk profile, and competitive position dramatically increases your investment accuracy and odds of success.
Pass the quiz to earn the IBM Certified Value Investor badge.
FairValueLabs Disclaimer
All valuations, scores, ratings, and classifications on this page are produced by the FairValueLabs internal valuation system. They do not represent actual market value, guaranteed outcomes, or professional investment advice. These are analytical estimates for educational and research purposes only.
This is not financial advice. All data is sourced from SEC EDGAR public filings. Always consult a qualified financial advisor before making investment decisions.
Last updated: Apr 20, 2026. Data sources: SEC EDGAR (financial statements), Yahoo Finance (market data, analyst consensus). Data may not reflect the most recent quarter.
IBM analysis methodology: How we calculate fair value, Z-Scores, and moat ratings