Running The Numbers – IBM ($IBM) Is Cheap
Valuecruncher has previously completed a valuation of $IBM. $IBM was trading at US$126.52 when we completed that valuation. Our valuation was US$141.42. With $IBM trading at US$119.42 we thought it was time to update this valuation.
Valuecruncher valuation model of $IBM with interactive assumptions
Valuecruncher produces a valuation of US$128.25 for $IBM. This is a current valuation not a target price. This valuation is 7.4% above the current share price of US$119.42.
Assumptions
Our assumptions are revenues of US$105.0 billion in 2008 growing to US$115.0 billion in 2010. This growth is a compound annual growth rate (CAGR) of 5% for 2007-10 this compares to a 4% CAGR from 2005-7. We have used a flat EBITDA margin of 20% to 2010. We used a terminal growth rate of 3.0%. We used a terminal capital expenditure number of US$5.5 billion. We have used a WACC (discount rate) of 9.0%. All of these assumptions can be amended in the Valuecruncher on-line valuation model to adjust the valuation.
Our analysis incorporates the cash and debt on the $IBM balance sheet – Valuecruncher calculates a net debt number.
Based on our analysis the current share price looks cheap. It appears an opportunity to be buying $IBM. Play with our assumptions – what does your analysis say?
Disclosure: None
Valuecruncher has a database of over 1,000 companies on major international exchanges. You can explore, create and share valuations for any of these companies.
Tags: IBM