IBM (IBM) has been one of the most-watched stocks recently by Zacks.com visitors. Therefore, we recommend considering several factors that can affect a stock’s short-term performance.
The technology and consulting company’s stock has returned +10.2% over the past month. In contrast, the Zacks S&P 500 Composite Index, +5.8% was unchanged. The Zacks Computer – Integrated Systems industry, which includes IBM, has gained 4.2% in this period. The key question here is where the stock is likely to go in the short term.
While media releases and rumors about significant changes in a company’s business prospects typically cause its stock to “trend” and lead to immediate price movements, there are some fundamentals that ultimately govern buy-and-hold decisions. There are always facts.
Zacks prioritizes evaluating changes in a company’s future earnings expectations above all else. That’s because we believe that the present value of future income streams determines the fair value of a stock.
Essentially, we study how the sell-side analysts covering a stock are revising their earnings estimates to reflect the impact of the latest business trends. And as a company’s earnings expectations rise, so does the fair value of its stock. If the fair value is higher than the current market price, investors will be more willing to buy the stock, causing the price to rise. This is why empirical research has shown that there is a strong correlation between trends in earnings forecast revisions and short-term stock price movements.
IBM is expected to post earnings of $3.76 per share for the current quarter, representing a -2.8% change from the year-ago period. Over the past 30 days, the Zacks Consensus Estimate has changed +0%.
The consensus earnings estimate for the current fiscal year of $10.12 represents a +5.2% year-over-year change. This estimate has changed by +0.1% over the past 30 days.
Next year’s consensus earnings estimate of $10.58 represents a +4.5% change from the earnings that IBM was expected to report a year ago. Over the past month, the forecast has changed by +0.2%.
The Zacks Rank, a proprietary stock evaluation tool with an impressive, outside-audited track record of impressive results, leverages the power of earnings estimate revisions to be a more conclusive indicator of a stock’s short-term price performance. . The magnitude of the recent consensus estimate change, along with three other factors related to earnings expectations, has led to IBM’s Zacks Rank #3 (Hold).
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The chart below shows the company’s consensus EPS estimate over the next 12 months over time.
There’s no question that a company’s profit growth is the best indicator of its financial health, but nothing will happen if it isn’t profitable. It’s nearly impossible for a company to expand its bottom line without growing it over the long term. Therefore, it’s important to know a company’s earnings growth potential.
For IBM, the consensus revenue estimate for the current quarter is $17.61 billion, representing a year-over-year change of +1.3%. Estimates for the current and next fiscal year are $62.81 billion and $65.9 billion, representing changes of +1.5% and +4.9%, respectively.
IBM reported revenue of $14.97 billion in its last reported quarter. This corresponds to a +1.5% change compared to the same period last year. EPS for the same period was $2.30, compared to $2.20 a year ago.
The reported earnings are a surprise of -1.46% when compared to the Zacks Consensus Estimate of $15.19 billion. EPS surprise was +1.32%.
The company beat consensus EPS estimates in each of the trailing four quarters. The company surpassed consensus revenue estimates two times during the period.
You cannot make efficient investment decisions without considering stock valuation. Whether a stock’s current price accurately reflects the intrinsic value of the underlying business and the company’s growth prospects is a key determinant of future stock performance.
The present value of a company’s valuation multiples such as price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), as well as the company’s past value, are Comparing a company to its peers based on these parameters will help you see how reasonable its stock price is. You can get to know better.
The Zacks Value Style Score (part of the Zacks Style Scores system) pays close attention to both traditional and non-traditional valuation metrics and rates stocks from A to F, where A is better than B. , B is better than C, A is better than B, and B is better than C). ), can be very helpful in identifying whether a stock is overvalued, properly valued, or temporarily undervalued.
IBM is rated C on this score, indicating it performs on par with its industry peers. Click here to see the values of some of the metrics that determined this grade.
The facts discussed here, and many others on Zacks.com, may help you decide whether the market buzz about IBM is worth paying attention to. However, the company’s Zacks Rank #3 suggests it could outperform the broader market in the near term.
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