Is International Business Machines (IBM) overvalued?
On Equity Rank's model estimate, IBM trades 79% above its fair value. International Business Machines (IBM) last closed at $245.00; the multi-method model fair value is $136.65.
| Price | Model fair value | Price vs model |
|---|---|---|
| $245.00 | $136.65 | 79% above |
What the answer rests on
- 0 of 10 valuation methods put IBM's value above its price and 10 put it below, so the methods mostly agree.
- To justify today's price, IBM's free cash flow would need to grow about 3.7% a year for ten years (a reverse discounted cash flow). Over the last three years it actually grew 12.2% a year.
- IBM trades at 21.7 times its last year's earnings, against a median of 20.5 for 30 profitable IT Services companies.
- Over the past year the price sat below the model fair value on 0% of trading days. The gap ranged from 32% above to 126% above the model fair value.
Read this before relying on it
The model fair value is an estimate from published financial statements. It is not a forecast of where the price goes, and it can be wrong. Within 10% either side we call it close to fair value: valuation models are not precise enough to read more into a smaller gap. Our own lists have no proven edge over the market yet; the live record shows every result, misses included.
Every valuation method behind IBM's fair value · What prices assume · Other companies