IBM

We rate INTERNATIONAL BUSINESS MACHINES CORP (IBM) as a Hold with a composite score of 53.4/100 at a current price of $229.08. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in stability (84th percentile) and quality (60th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (33th percentile) and momentum (48th percentile) tempers our overall conviction. We assign a No Moat rating (38/100), High uncertainty, and Poor capital allocation.

Key items to watch: balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

INTERNATIONAL BUSINESS MACHINES CORP holds a top-quartile position (#0 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 53.4/100 places it at rank #1475 in our full 7,333-stock universe. As a mega-cap company with a $261.4B market capitalization, INTERNATIONAL BUSINESS MACHINES CORP benefits from significant scale, distribution networks, and brand recognition that smaller competitors cannot easily replicate.

Revenue is growing at 4%, though momentum at the 48th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 57% (+14.4pp vs sector) narrow to operating margins of 9% (+7.7pp vs sector) and net margins of 7.2%, yielding a gross-to-net conversion rate of 13%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $229.08, INTERNATIONAL BUSINESS MACHINES CORP is trading near fair value based on current fundamentals. Our value factor score of 59/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 51.5x (a 132% premium to the sector median of 22.3x), EV/EBITDA of 40.8x (at a premium), P/B of 8.6x, P/S of 3.8x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a High uncertainty rating to INTERNATIONAL BUSINESS MACHINES CORP. Key risk factors include significant leverage (226% debt-to-equity), elevated valuation multiple (P/E 51.5x) that leaves limited margin for error. The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: significant leverage (226% debt-to-equity); elevated valuation multiple (P/E 51.5x) that leaves limited margin for error. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 84th percentile and quality factor at the 60th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 57% provide a buffer against cost pressures; above-average stability (84th percentile) suggests predictable business dynamics; large-cap scale ($261.4B) provides resilience. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate INTERNATIONAL BUSINESS MACHINES CORP's capital allocation as Poor. Key concerns include elevated leverage (226% D/E). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — INTERNATIONAL BUSINESS MACHINES CORP significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, INTERNATIONAL BUSINESS MACHINES CORP receives a Hold rating with a composite score of 53.4/100 (rank #1475 of 7,333). Our quantitative framework assigns a No Moat (38/100, trend: stable), High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 57/100.

Our analysis supports a neutral stance on INTERNATIONAL BUSINESS MACHINES CORP. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.