Should Value Investors Buy IBM (IBM) Stock?

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One stock to keep an eye on is IBM (IBM). IBM is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. IBM has a P/S ratio of 1.57. This compares to its industry's average P/S of 1.58.

Finally, investors will want to recognize that IBM has a P/CF ratio of 9.17. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. IBM's current P/CF looks attractive when compared to its industry's average P/CF of 10.25. Within the past 12 months, IBM's P/CF has been as high as 13.52 and as low as 7.74, with a median of 9.32.

These are only a few of the key metrics included in IBM's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, IBM looks like an impressive value stock at the moment.

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