International Business Machines Corporation (IBM) is a technology company that operates as a global integrated solutions and services provider. The company functions through the four broad business segments: Software; Consulting; Infrastructure; and Financing. It has a $116.22 billion market capitalization.
On the other hand, Microsoft Corporation (MSFT) is a software behemoth providing software services, solutions, and devices worldwide. It has a $1.94 trillion market capitalization.
IBM is gaining traction in its cloud business and making some analysts believe that it is on the path to becoming the next MSFT. IBM Cloud is a suite of cloud computing services that offers a platform as a service (PaaS), infrastructure as a service (IaaS), and software as a service (SaaS). IBM Cloud has a stack of 170 products and cloud services for B2B organizations.
MSFT’s public cloud ecosystem is called Azure, which offers a set of cloud services that enable customers to build, manage and deploy applications. The company also offers cloud services such as Microsoft Dynamics, Microsoft Office 365, and Microsoft OneDrive.
IBM’s stock has gained 6.9% over the past six months and 0.9% intraday to close its last trading session at $129.66.
Here are the factors that could influence IBM’s performance in the near term:
Solid Bottom-line Growth
For the fiscal second quarter that ended June 30, IBM’s total revenue increased 9.3% year-over-year to $15.54 billion. Non-GAAP gross profit rose 5.5% from the prior-year quarter to $8.47 billion. Non-GAAP income from continuing operations and non-GAAP EPS from continuing operations improved 44.6% and 43.5% from the same period the prior year to $2.11 billion and $2.31.
In terms of its forward non-GAAP P/E, IBM is trading at 13.86x, 24.4% lower than the industry average of 18.34x. Its forward Price/Sales multiple of 1.95 is 29.8% lower than the industry average of 2.77. In terms of its forward Price/Cash Flow, IBM is trading at 9.46x, 44.9% lower than the industry average of 17.18x.
Impressive Profitability Margins
IBM’s trailing-12-month EBITDA margin and net income margin of 20.37% and 9.36% are 55.9% and 120.4% higher than their respective industry averages of 13.07% and 4.25%. Its trailing-12-month ROE, ROTC, and ROA of 27.22%, 5.33%, and 4.38% are 273.6%, 34.5%, and 58.6% higher than their respective industry averages of 7.28%, 3.96%, and 2.76%.
IBM has an overall rating of…
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