International Business Machines Corporation (IBM): investment thesis checklist
What a value investor writing down why they own International Business Machines Corporation would be relying on, read from its filings: the figures that have carried the business, the lines a reader might set on them, and the published tests it meets today. A list to write against, not a view on the company.
1. The figures the case would rest on
- Return on invested capital: 11.7% in FY2023; between 7.9% and 16.5% over 4 filed years, median 10.6%. Does the thesis need it to stay inside that range?
- Return on equity: 32.5% in FY2025; between 7.5% and 65.1% over 10 filed years, median 32.6%. Does the thesis need it to stay inside that range?
- Free cash flow yield: 4.3% in FY2025; between 4.3% and 14.4% over 10 filed years, median 8.7%. Does the thesis need it to stay inside that range?
- EV to EBIT: 27.69x in FY2025; between 11.91x and 75.74x over 8 filed years, median 28.55x. Does the thesis need it to stay inside that range?
- Price to earnings: 26.52x in FY2025; between 11.94x and 78.27x over 10 filed years, median 20.57x. Does the thesis need it to stay inside that range?
- Gross margin: 58.2% in FY2025; between 46.4% and 58.2% over 10 filed years, median 54.8%. Does the thesis need it to stay inside that range?
- Revenue growth, 5-year CAGR: 4.1% in FY2025; between -9.1% and 4.1% over 10 filed years, median -5.2%. Does the thesis need it to stay inside that range?
- Share count change: 1.2% in FY2025; between -6.8% and 1.6% over 9 filed years, median 0.8%. Does the thesis need it to stay inside that range?
2. What must stay true: guardrails a reader might set
Each line is drafted from International Business Machines Corporation's own current figure, never from a level we think a business should clear, and replayed over its filed years. They are a reader's to keep, edit or drop.
Debt to Equity stays at or below 2.76x
Today 2.21x. Replayed over 8 filed years, it would have broken in 5; most recently FY2023, at 2.97x (10-K, filed 2024-02-26).
Revenue Growth 1Y stays at or above 0%
Today 7.62%. Replayed over 9 filed years, it would have broken in 3; most recently FY2020, at -4.39% (10-K, filed 2021-02-23).
Dividend Rate stays at or above $6.69
Today $6.76. This indicator depends on inputs (market price, multi-statement composites) whose history is not deep enough to re-derive it with the same formula as the live value, so no honest retro-test exists for it.
3. What would break it
- A filed year in which debt to equity rose above 2.76x.
- A filed year in which revenue growth 1y fell below 0%.
- A filed year in which dividend rate fell below $6.69.
4. The published tests it meets today
Of 30 tests value investors published: 1 met, 26 not met, 3 we could not complete. Counts, never a score.
Meets: Cash-covered dividend.
What this cannot tell you
What the numbers say today, not the day one stops being true. The reasons are not written down.
An account adds
One email the night a number you wrote down breaks. Silence otherwise.
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How this is computedA computation on accounts filed with the SEC, not a recommendation and not advice. Past filings do not indicate future results. Risk disclaimer.