IBM by dffhrtcv3

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									IBM
 Presented by
  David Hill
Greg Sudkamp
Oscar Towne
Is IBM a Good Investment?
 Discussion of Market Capitalization and
  stock performance trend analysis.
 Income Statement Analysis.
 Balance Sheet Analysis.
 Analysis of Cash Flows.
 Misc. Trends and Analysis.
Market Capitalization
 Current Outstanding Common Shares 1.8
  Billion.
 Stock Price as of 12/31/00 = $84.69
 Total Market Cap. = 150.9 Billion
Market Comparison
 IBM over the last three years.
 Outperformed the DJI
 Outperformed Hewlett Packard
 Since the beginning of 1999 IBM has had a
  50% increase in stock price valuation.
Market Comparison
Income Statement

     Analysis
Gross Profit Comparison
($000,000’s)
  95000
  85000
  75000
  65000                                    Revenue
  55000                                    CGS
                                           Gross Prof
  45000
  35000
  25000
               1997   1998   1999   2000
Income Comparison
($000,000,000’s)


     90
     80
     70
     60
                                               Sales
     50
                                               Op. Exp
     40                                        Op. Inc.
     30                                        Net Inc.
     20
     10
       0
                   1997   1998   1999   2000
ROS and ROA Comparison
   ROS and ROA both     12.0%
    have upward trend.   10.0%                        ROS
   ROA is lower than    8.0%                         Ind.
    industry average.    6.0%
                                                      ROS
                                                      ROA
   ROS is higher than   4.0%
    industry average.                                 Ind.
                         2.0%                         ROA

                         0.0%



                                 1998
                                        1999
                                               2000
Return on Stockholders’ Equity
                           (%)

   ROSE increased 18%     40
                           39
    from 1998 to 2000.
                           38
   ROSE is 15% higher     37
                           36
    than the industry      35
                                                  IBM
    average in 2000        34
                                                  Ind. Avg
                           33
   Increasing trend for   32
    ROSE is very           31
    favorable.             30
                                 1998 1999 2000
Earnings per Share of CS
($’s)

  5                                   EPS is up 36% in
4.5                                    2000 compared to
  4
3.5
                                       1998.
  3                                   The greater EPS the
2.5
  2
                             IBM       higher the stock will
1.5                                    be valued.
  1
0.5
  0
        1998   1999   2000
Balance Sheet

   Analysis
                                             Assets
                                 Fiscal year ended:     12/31/00         12/31/99   12/31/98
($ in 000's)                                          most recent year


   Current assets                                       43,880.0         43,155.0   42,360.0

   Property,plant and equipment, net                    16,714.0         17,590.0   19,631.0

   Other assets                                         27,755.0         26,750.0   24,109.0

   TOTAL Assets                                         88,349.0         87,495.0   86,100.0
                                            Liabilities
                                   Fiscal year ended:     12/31/00         12/31/99   12/31/98
($ in 000's)                                            most recent year

   Current liablilities                                  36406.00          39578.00   36827.00

   Long-term liabilities                                 31319.00          27406.00   29840.00




   Contributed capital                                   12647.00          12009.00   10368.00

   Retained earinings                                    23784.00          16878.00   10141.00

   Treasury stock and other SE                           -15807.00         -8376.00   -1076.00



   Total Liabilities & Stockholders' Equity              88349.00          87495.00   86100.00
      Current Assets and Current
              Liabilities
   Constant increase in
    current assets.
   Liabilities had an
    increase followed by a
    decrease
               Current Ratio
   Shows short term
                           1.6
    liquidity.             1.4
   Becoming more liquid   1.2

   Lower than industry.    1
                           0.8                    IBM
                           0.6                    Industry

                           0.4
                           0.2
                            0
                                 1998 1999 2000
                       Quick Ratio
      1998 1999 2000                   Ability to pay current
1.2                                     debts when due.
 1
                         Industry
                                       Stable trend.
0.8
                         IBM
                                       Lower than industry.
0.6

0.4                      Linear
                         (IBM)
0.2

 0
 1998     1999    2000
                  Debt Ratio
   Solvency of IBM.    3.5
   Average decrease.    3

   Much higher than    2.5

    industry.            2
                                               IBM
                        1.5                    Industry
                         1
                        0.5
                         0
                              1998 1999 2000
Cash Flow

 Analysis
             Cash Equivalents
   Cash is KING!         Cash Equivalents At Year
                               End (Millions)
   But…
                       8000
                       7000
   Cash Equivalents   6000
                       5000
    have decreased     4000
    every year         3000
                       2000
                       1000
                          0
                              '97   '98   '99   '00
          Operating Cash Flow
   Although                 Operating vs. Investing
    Operating CF
                                   (millions)
    slightly
    varies…
                    12000
   There is                                        Operating
                    10000
    always                                          CF
                    8000
    sufficient CF
    to cover        6000
    Investing       4000                            Cash
    Activities      2000                            Outflow
                                                    From
                       0
                            '97   '98   '99   '00   Investing
              Inventory Turnover
                               IBM’s Inventory
       Inventory Turnover       Turnover ratio has
              Ratio
 12
                                increased every year
11.5                           This is an improving
 11
10.5
                                trend showing that
 10                             IBM is becoming
 9.5                            more efficient in
   9
 8.5
                                managing inventory
        '98    '99    '00
           Price/Earnings Ratio
   IBM’s P/E ratio is less              P/E Ratio
    than the industry
                              30
    average as of 12/31/00    25
   This ratio shows that     20
    IBM’s stock is            15
                              10
    undervalued relative to
                              5
    similar firms in the      0
    industry                       '98       '99      '00

                                   IBM      Industry Avg.
Stock Price vs. Operating Income
   IBM’s stock price          Stock Prices (12/31) &
    has varied from             Operating Income in
    year to year                  100's of Millions
   The stock price
                         150
    tends to move with
    IBM’s operating      100
    income                50
   Higher operating
                           0
    income leads to
                                 '98   '99    '00
    happy investors!
                          Stock Price        Operating Income
             Times-Interest-Earned
     Times-Interest-Earned      The Times-Interest-
                                 Earned ratio varies
18
16                               from year to year
14
12
                                IBM’s Times-Interest-
10                               Earned ratio
 8
 6
                                 outperformed the
 4                               industry average in
 2
 0
                                 ’99 & ’00.
       '98     '99    '00
               Dividend Yield
   IBM’s dividend yield             Dividend Yield
    is greater than the 5-
                             0.60%
    year industry average.
                             0.50%
   This high dividend       0.40%
    yield makes IBM’s        0.30%
                             0.20%
    stock more attractive
                             0.10%
    relative to similar      0.00%
    firms with a similar              '98      '99      '00

    stock price.                     IBM    Industry Avg.
        Intrinsic Value
           according to valuepro.net

($’s)


120

100

 80
                                       Intrinsic
 60                                    Actual

 40

 20

    0
     Final Conclusion

 Short Term Investor – Sell Short
Long Term Investor – Buy and Hold

								
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