As of June 13, 2025, International Business Machines Corp's estimated intrinsic value ranges from $92.37 to $271.90 per share, depending on the valuation methodology applied.
| Valuation Method | Fair Value (USD) | Implied Upside/Downside |
|---|---|---|
| Discounted Cash Flow (10Y) | $271.90 | -3.3% |
| Discounted Cash Flow (5Y) | $235.03 | -16.4% |
| Dividend Discount Model (Multi-Stage) | $193.22 | -31.2% |
| Dividend Discount Model (Stable) | $138.33 | -50.8% |
| Earnings Power Value | $92.37 | -67.1% |
Is International Business Machines Corp (IBM) undervalued or overvalued?
With the current market price at $281.03, the stock appears to be significantly overvalued.
Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate International Business Machines Corp's intrinsic value, including:
The cost of capital is a critical factor in valuation models, representing the required return for investors.
| WACC Component | Low | High |
|---|---|---|
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.68 | 0.76 |
| Cost of equity | 7.0% | 9.1% |
| Cost of debt | 5.0% | 5.0% |
| Tax rate | 13.4% | 31.6% |
| Debt/Equity ratio | 0.22 | 0.22 |
| After-tax WACC | 6.5% | 8.1% |
Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:
| DCF Model | Fair Value | Enterprise Value | % from Terminal Value |
|---|---|---|---|
| 5-Year Growth | $235 | $270,683M | 84.9% |
| 10-Year Growth | $272 | $304,949M | 71.6% |
| 5-Year EBITDA | $120 | $164,220M | 75.1% |
| 10-Year EBITDA | $160 | $200,727M | 56.9% |
The DDM values a company based on its expected future dividend payments. We used two approaches:
EPV assesses a company's value based on its current normalized earnings power, assuming no growth.
| EPV Component | Value |
|---|---|
| Normalized Earnings | $9,946M |
| Discount Rate (WACC) | 8.1% - 6.5% |
| Enterprise Value | $123,140M - $153,059M |
| Net Debt | $52,249M |
| Equity Value | $70,891M - $100,810M |
| Outstanding Shares | 929M |
| Fair Value | $76 - $108 |
| Selected Fair Value | $92.37 |
| Metric | Value |
|---|---|
| Market Capitalization | $261189M |
| Enterprise Value | $313438M |
| Trailing P/E | 47.71 |
| Forward P/E | 42.51 |
| Trailing EV/EBITDA | 10.50 |
| Current Dividend Yield | 247.07% |
| Dividend Growth Rate (5Y) | 1.48% |
| Debt-to-Equity Ratio | 0.22 |
To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:
| Valuation Method | Weight | Weighted Value |
|---|---|---|
| Discounted Cash Flow (10Y) | 30% | $81.57 |
| Discounted Cash Flow (5Y) | 25% | $58.76 |
| Dividend Discount Model (Multi-Stage) | 20% | $38.64 |
| Dividend Discount Model (Stable) | 15% | $20.75 |
| Earnings Power Value | 10% | $9.24 |
| Weighted Average | 100% | $208.96 |
Based on our comprehensive valuation analysis, International Business Machines Corp's weighted average intrinsic value is $208.96, which is approximately 25.6% below the current market price of $281.03.
Key investment considerations:
Given these factors, we believe International Business Machines Corp is currently significantly overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.