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International Business Machines Corp. (IBM)


Enterprise Value to EBITDA (EV/EBITDA)

Difficulty: Intermediate


Earnings before Interest, Tax, Depreciation and Amortization (EBITDA)

International Business Machines Corp., EBITDA calculation

USD $ in millions

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12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net income attributable to IBM 8,728  5,753  11,872  13,190  12,022 
Add: Net income attributable to noncontrolling interest 17  17  16 
Less: Income (loss) from discontinued operations, net of tax (5) (9) (174) (3,729)
Add: Income tax expense 2,619  5,642  449  2,581  4,235 
Earnings before tax (EBT) 11,359  11,417  12,346  15,953  19,992 
Add: Interest expense 723  615  630  468  484 
Earnings before interest and tax (EBIT) 12,082  12,032  12,976  16,421  20,476 
Add: Depreciation 3,127  3,021  2,837  2,662  3,145 
Add: Amortization of intangibles 1,353  1,520  1,544  1,193  1,347 
Earnings before interest, tax, depreciation and amortization (EBITDA) 16,562  16,573  17,357  20,276  24,968 

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).

Item Description The company
EBITDA To calculate EBITDA analysts start with net earnings. To that earnings number, interest, taxes, depreciation, and amortization are added. EBITDA as a pre-interest number is a flow to all providers of capital. International Business Machines Corp.’s EBITDA declined from 2016 to 2017 and from 2017 to 2018.

Enterprise Value to EBITDA Ratio, Current

International Business Machines Corp., current EV/EBITDA calculation, comparison to benchmarks

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Selected Financial Data (USD $ in millions)
Enterprise value (EV) 152,818 
Earnings before interest, tax, depreciation and amortization (EBITDA) 16,562 
Ratio
EV/EBITDA 9.23
Benchmarks
EV/EBITDA, Competitors
Adobe Inc. 42.56
Alphabet Inc. 15.93
Facebook Inc. 16.43
Intuit Inc. 35.09
Microsoft Corp. 18.68
Oracle Corp. 10.10
salesforce.com inc. 56.22
EV/EBITDA, Sector
Software & Computer Services 16.88
EV/EBITDA, Industry
Technology 13.89

Based on: 10-K (filing date: 2019-02-26).

If company EV/EBITDA is lower then the EV/EBITDA of benchmark then company is relatively undervalued.

Otherwise, if company EV/EBITDA is higher then the EV/EBITDA of benchmark then company is relatively overvalued.


Enterprise Value to EBITDA Ratio, Historical

International Business Machines Corp., historical EV/EBITDA 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)
Enterprise value (EV)1 158,056  178,322  203,395  159,078  195,396 
Earnings before interest, tax, depreciation and amortization (EBITDA)2 16,562  16,573  17,357  20,276  24,968 
Ratio
EV/EBITDA3 9.54 10.76 11.72 7.85 7.83
Benchmarks
EV/EBITDA, Competitors
Adobe Inc. 37.27 36.77 28.22 33.16 45.46
Alphabet Inc. 15.69 19.10 15.51 16.21 13.43
Facebook Inc. 14.64 21.98 23.48 35.80 33.57
Intuit Inc. 31.25 21.97 19.58 22.81 14.64
Microsoft Corp. 15.58 14.93 13.70 12.37 8.70
Oracle Corp. 9.50 12.73 9.86 9.80 9.35
salesforce.com inc. 86.78 77.91 71.31 137.39 449.68
EV/EBITDA, Sector
Software & Computer Services 15.22 17.39 15.34 14.68 11.73
EV/EBITDA, Industry
Technology 13.33 14.11 12.04 10.47 10.40

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

3 EV/EBITDA = EV ÷ EBITDA
= 158,056 ÷ 16,562 = 9.54

Ratio Description The company
EV/EBITDA EV/EBITDA is a valuation indicator for the overall company rather than common stock. International Business Machines Corp.’s EV/EBITDA ratio declined from 2016 to 2017 and from 2017 to 2018.