Microsoft Excel LibreOffice Calc

International Business Machines Corp. (IBM)

Profitability Analysis

Difficulty: Beginner

Profitability ratios measure the company’s ability to generate profitable sales from its resources (assets).

Ratios (Summary)

International Business Machines Corp., profitability ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Return on Sales
Gross profit margin 46.41% 45.78% 47.92% 49.77% 50.01%
Operating profit margin 16.61% 14.91% 16.40% 19.19% 19.97%
Net profit margin 10.97% 7.27% 14.86% 16.14% 12.96%
Return on Investment
Return on equity (ROE) 51.96% 32.70% 65.07% 92.48% 101.30%
Return on assets (ROA) 7.07% 4.59% 10.11% 11.94% 10.23%

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24).

Ratio Description The company
Gross profit margin Gross profit margin indicates the percentage of revenue available to cover operating and other expenditures. International Business Machines Corp.’s gross profit margin deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018.
Operating profit margin A profitability ratio calculated as operating income divided by revenue. International Business Machines Corp.’s operating profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Net profit margin An indicator of profitability, calculated as net income divided by revenue. International Business Machines Corp.’s net profit margin deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018.
Ratio Description The company
ROE A profitability ratio calculated as net income divided by shareholders’ equity. International Business Machines Corp.’s ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level.
ROA A profitability ratio calculated as net income divided by total assets. International Business Machines Corp.’s ROA deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018.

Gross Profit Margin

International Business Machines Corp., gross profit margin calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (USD $ in millions)
Gross profit 36,936  36,227  38,294  40,684  46,407 
Revenue 79,591  79,139  79,919  81,741  92,793 
Ratio
Gross profit margin1 46.41% 45.78% 47.92% 49.77% 50.01%
Benchmarks
Gross Profit Margin, Competitors
Adobe Inc. 86.77% 86.16% 86.00% 84.48% 85.00%
Alphabet Inc. 56.48% 58.88% 61.08% 62.44% 61.07%
Facebook Inc. 83.25% 86.58% 86.29% 84.01% 82.73%
Intuit Inc. 83.62% 84.37% 83.98% 82.71% 85.18%
Microsoft Corp. 65.25% 61.91% 61.58% 64.70% 68.82%
Oracle Corp. 79.71% 80.20% 79.81% 80.30% 81.09%
salesforce.com inc. 73.54% 73.38% 75.18% 76.01% 76.21%

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24).

2018 Calculations

1 Gross profit margin = 100 × Gross profit ÷ Revenue
= 100 × 36,936 ÷ 79,591 = 46.41%

Ratio Description The company
Gross profit margin Gross profit margin indicates the percentage of revenue available to cover operating and other expenditures. International Business Machines Corp.’s gross profit margin deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018.

Operating Profit Margin

International Business Machines Corp., operating profit margin calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (USD $ in millions)
Operating income 13,217  11,799  13,105  15,689  18,532 
Revenue 79,591  79,139  79,919  81,741  92,793 
Ratio
Operating profit margin1 16.61% 14.91% 16.40% 19.19% 19.97%
Benchmarks
Operating Profit Margin, Competitors
Adobe Inc. 31.45% 29.69% 25.51% 18.83% 9.95%
Alphabet Inc. 19.24% 23.59% 26.27% 25.82% 24.99%
Facebook Inc. 44.62% 49.70% 44.96% 34.72% 40.06%
Intuit Inc. 25.10% 26.95% 26.46% 17.60% 29.16%
Microsoft Corp. 31.77% 24.82% 23.65% 19.41% 31.97%
Oracle Corp. 34.34% 33.69% 34.02% 36.29% 38.56%
salesforce.com inc. 2.25% 0.77% 1.72% -2.71% -7.03%
Operating Profit Margin, Sector
Software & Computer Services 26.29% 25.53% 25.16% 23.32% 27.17%
Operating Profit Margin, Industry
Technology 25.44% 24.60% 24.20% 23.17% 23.88%

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24).

2018 Calculations

1 Operating profit margin = 100 × Operating income ÷ Revenue
= 100 × 13,217 ÷ 79,591 = 16.61%

Ratio Description The company
Operating profit margin A profitability ratio calculated as operating income divided by revenue. International Business Machines Corp.’s operating profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Net Profit Margin

International Business Machines Corp., net profit margin calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (USD $ in millions)
Net income attributable to IBM 8,728  5,753  11,872  13,190  12,022 
Revenue 79,591  79,139  79,919  81,741  92,793 
Ratio
Net profit margin1 10.97% 7.27% 14.86% 16.14% 12.96%
Benchmarks
Net Profit Margin, Competitors
Adobe Inc. 28.69% 23.20% 19.96% 13.13% 6.47%
Alphabet Inc. 22.46% 11.42% 21.58% 21.80% 21.88%
Facebook Inc. 39.60% 39.20% 36.97% 20.57% 23.58%
Intuit Inc. 20.31% 18.76% 20.86% 8.71% 20.13%
Microsoft Corp. 15.02% 23.57% 19.69% 13.03% 25.42%
Oracle Corp. 9.60% 24.74% 24.03% 26.00% 28.62%
salesforce.com inc. 1.22% 2.14% -0.71% -4.89% -5.70%
Net Profit Margin, Sector
Software & Computer Services 19.18% 17.86% 20.56% 17.48% 20.50%
Net Profit Margin, Industry
Technology 19.55% 17.79% 19.14% 17.77% 18.34%

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24).

2018 Calculations

1 Net profit margin = 100 × Net income attributable to IBM ÷ Revenue
= 100 × 8,728 ÷ 79,591 = 10.97%

Ratio Description The company
Net profit margin An indicator of profitability, calculated as net income divided by revenue. International Business Machines Corp.’s net profit margin deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018.

Return on Equity (ROE)

International Business Machines Corp., ROE calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (USD $ in millions)
Net income attributable to IBM 8,728  5,753  11,872  13,190  12,022 
Total IBM stockholders’ equity 16,796  17,594  18,246  14,262  11,868 
Ratio
ROE1 51.96% 32.70% 65.07% 92.48% 101.30%
Benchmarks
ROE, Competitors
Adobe Inc. 27.67% 20.02% 15.74% 8.99% 3.96%
Alphabet Inc. 17.30% 8.30% 14.01% 13.59% 13.82%
Facebook Inc. 26.28% 21.43% 17.26% 8.34% 8.14%
Intuit Inc. 51.44% 71.71% 84.32% 15.65% 29.47%
Microsoft Corp. 20.03% 29.29% 23.33% 15.23% 24.59%
Oracle Corp. 8.37% 17.33% 18.82% 20.42% 23.37%
salesforce.com inc. 1.36% 2.40% -0.95% -6.61% -7.64%
ROE, Sector
Software & Computer Services 20.07% 17.46% 19.86% 17.48% 20.98%
ROE, Industry
Technology 27.20% 20.64% 21.96% 22.58% 22.66%

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24).

2018 Calculations

1 ROE = 100 × Net income attributable to IBM ÷ Total IBM stockholders’ equity
= 100 × 8,728 ÷ 16,796 = 51.96%

Ratio Description The company
ROE A profitability ratio calculated as net income divided by shareholders’ equity. International Business Machines Corp.’s ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level.

Return on Assets (ROA)

International Business Machines Corp., ROA calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (USD $ in millions)
Net income attributable to IBM 8,728  5,753  11,872  13,190  12,022 
Total assets 123,382  125,356  117,470  110,495  117,532 
Ratio
ROA1 7.07% 4.59% 10.11% 11.94% 10.23%
Benchmarks
ROA, Competitors
Adobe Inc. 13.80% 11.65% 9.20% 5.37% 2.49%
Alphabet Inc. 13.20% 6.42% 11.63% 11.09% 11.01%
Facebook Inc. 22.72% 18.85% 15.73% 7.46% 7.32%
Intuit Inc. 23.39% 23.87% 23.04% 7.35% 17.44%
Microsoft Corp. 6.40% 8.80% 8.67% 6.92% 12.81%
Oracle Corp. 2.79% 6.92% 7.93% 8.96% 12.13%
salesforce.com inc. 0.61% 1.02% -0.37% -2.46% -2.54%
ROA, Sector
Software & Computer Services 9.60% 8.27% 10.12% 9.02% 10.99%
ROA, Industry
Technology 11.52% 9.15% 10.52% 10.93% 11.61%

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24).

2018 Calculations

1 ROA = 100 × Net income attributable to IBM ÷ Total assets
= 100 × 8,728 ÷ 123,382 = 7.07%

Ratio Description The company
ROA A profitability ratio calculated as net income divided by total assets. International Business Machines Corp.’s ROA deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018.