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International Business Machines Corp. (IBM)

Price to FCFE (P/FCFE)

Difficulty: Intermediate

Free Cash Flow to Equity (FCFE)

International Business Machines Corp., FCFE 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 
Net income attributable to noncontrolling interest 17  17  16  8  6 
Net noncash charges 5,949  4,141  3,839  6,254  6,606 
Changes in operating assets and liabilities, net of acquisitions/divestitures 553  6,813  1,231  (2,444) (1,766)
Net cash provided by operating activities 15,247  16,724  16,958  17,008  16,868 
Payments for property, plant and equipment (3,395) (3,229) (3,567) (3,579) (3,740)
Proceeds from disposition of property, plant and equipment 248  460  424  370  404 
Investment in software (569) (544) (583) (572) (443)
Proceeds from new debt 6,891  9,643  9,132  5,540  8,180 
Payments to settle debt (8,533) (6,816) (6,395) (5,622) (4,644)
Short-term borrowings (repayments) less than 90 days, net 1,341  620  26  101  (1,753)
Free cash flow to equity (FCFE) 11,230  16,858  15,995  13,246  14,872 

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
FCFE Free cash flow to equity is the cash flow available to International Business Machines Corp.’s equity holders after all operating expenses, interest, and principal payments have been paid and necessary investments in working and fixed capital have been made. International Business Machines Corp.’s FCFE increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Price to FCFE Ratio, Current

International Business Machines Corp., current P/FCFE calculation, comparison to benchmarks

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No. shares of common stock outstanding 886,642,873
Selected Financial Data (USD $)
Free cash flow to equity (FCFE) (in millions) 11,230 
FCFE per share 12.67
Current share price (P) 134.32
Ratio
P/FCFE 10.60
Benchmarks
P/FCFE, Competitors
Adobe Inc. 22.72
Alphabet Inc. 35.28
Facebook Inc. 34.44
Intuit Inc. 32.81
Microsoft Corp. 44.50
Oracle Corp. 11.43
salesforce.com inc. 29.00
P/FCFE, Sector
Software & Computer Services 30.17
P/FCFE, Industry
Technology 23.89

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

If company P/FCFE is lower then the P/FCFE of benchmark then company is relatively undervalued.

Otherwise, if company P/FCFE is higher then the P/FCFE of benchmark then company is relatively overvalued.

Price to FCFE Ratio, Historical

International Business Machines Corp., historical P/FCFE calculation, comparison to benchmarks

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
No. shares of common stock outstanding1 889,866,256 921,167,894 943,212,551 960,880,915 988,424,172
Selected Financial Data (USD $)
Free cash flow to equity (FCFE) (in millions)2 11,230  16,858  15,995  13,246  14,872 
FCFE per share4 12.62 18.30 16.96 13.79 15.05
Share price1, 3 139.72 156.55 179.82 132.40 164.83
Ratio
P/FCFE5 11.07 8.55 10.60 9.60 10.95
Benchmarks
P/FCFE, Competitors
Adobe Inc. 19.88 35.59 27.41 25.83 31.68
Alphabet Inc. 34.84 31.41 22.41 29.23 31.52
Facebook Inc. 30.97 32.08 33.48 52.13 64.54
Intuit Inc. 29.29 42.22 21.01 18.76 19.03
Microsoft Corp. 37.57 8.86 10.12 9.99 10.47
Oracle Corp. 10.78 8.16 11.68 5.69 8.98
salesforce.com inc. 52.51 25.44 50.00 164.03 21.68
P/FCFE, Sector
Software & Computer Services 27.38 15.81 16.14 14.64 15.66
P/FCFE, Industry
Technology 22.94 13.58 12.81 9.98 12.47

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).

1 Data adjusted for splits and stock dividends.

2 See Details »

3 Close price on the filing date of International Business Machines Corp.’s Annual Report.

2018 Calculations

4 FCFE per share = FCFE ÷ No. shares of common stock outstanding
= 11,230,000,000 ÷ 889,866,256 = 12.62

5 P/FCFE = Share price ÷ FCFE per share
= 139.72 ÷ 12.62 = 11.07

Ratio Description The company
P/FCFE Price to free cash flow to equity is cash valuation indicator of stockholders’ equity. International Business Machines Corp.’s P/FCFE ratio declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.