A big chunk of the Berkshire portfolio…
It’s not hard to see why.
IBM’s recent earnings result beat the streets expectations. After an impressive upwards charge over recent years, IBM stock has been stuck in a relative side ways range for the past 12 months. Lets see if an intrinsic value analysis can shed any light on if IBM is good value at current prices.
Using a Required Return of 12.5% and average analyst forecast earnings growth of approximately 10%, we can see below that the current price of $202 represents fair value. Not a screaming buy, but maybe one to buy the dips if you are bullish on the future prospects of the business.
A closer look at the analysis shows two interesting points of note.
- Over the analysis period, IBM have managed to increase their intrinsic value year on year without fail, a sign of a well run business. Notice also that price is closely tracking value.
- Notice that over the last ten years total shareholder equity growth has been relatively contained despite a significant increase in earnings per share over the same period. This is reflective of IBM’s commitment to share buy backs, which is very supportive of intrinsic value and is a positive trait of IBM often referred to by Warren Buffett.
Remember, these posts are not recommendations to buy or sell. I simply like sharing some of my intrinsic value calculations. Don’t forget that you can click on the image about to make it bigger if you are finding it hard to read.
If you are new to my site and are interested to learn more about how I value stocks then check out my How to Value a Stock post.
The above is the old version of my intrinsic value spreadsheet, but if you are interested in doing analysis similar to the one above, then please visit my Intrinsic Value Calculator page by clicking here.
Thanks for visiting! The above are just my thoughts and analysis, if you would like to share any thoughts of your own then please leave a comment. It would be great to hear from you!