Shares of International Business Machines (IBM) are at a record high, having surged 68% over the past year. Some investors might think the stock is now too expensive.
However, this overlooks IBM’s ongoing transformation from traditional hardware to a focus on software and hybrid cloud services. The company is benefiting from increased demand for its artificial intelligence capabilities, leading to significant growth in earnings and cash flow.
Given these positive factors, IBM stock may still be a good buy.
IBM’s Competitive Value
IBM has a price-to-free-cash-flow ratio of 18, indicating good value compared to other tech stocks like Amazon and Microsoft, which average above 40. This suggests IBM is relatively cheap, and it also offers a 2.9% dividend yield.
Data by YCharts.
Looking Ahead for IBM
Determining if a stock is cheap or expensive requires more than one metric. The company’s ability to execute its strategy and grow profitably is crucial for future performance.
The positive news is that IBM is well-positioned to maintain its financial momentum and regain its status as a leading tech company, which can benefit shareholders in the long run.
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