International Business Machines Corporation

Analyst Listing

The following analysts provide coverage for the subject firm as of May 2016:

Broker	Analyst	Analyst Email
RBC Capital Markets	Amit Daryanani	amit.daryanani@rbccm.com
Drexel Hamilton	Brian J. White	bwhite@drexelhamilton.com
Stifel Nicolaus	David Grossman	dgrossman@stifel.com
JMP Securities	Greg Mcdowell	gmcdowell@jmpsecurities.com
Jefferies	James Kisner	jkisner@jefferies.com
Atlantic Equities	Josep Bori	j.bori@atlantic-equities.com
Cantor Fitzgerald	Joseph D. Foresi	jforesi@cantor.com
Daiwa Securities Co. Ltd.	Kazuya Nishimura	kazuya.nishimura@us.daiwacm.com
BMO Capital Markets	Keith Bachman	keith.bachman@bmo.com
Credit Suisse	Kulbinder Garcha	kulbinder.garcha@credit-suisse.com
Wells Fargo Securities	Maynard J. Um	maynard.um@wellsfargo.com
Societe Generale	Richard Nguyen	richard.nguyen@sgcib.com
Deutsche Bank Research	Sherri Scribner	sherri.scribner@db.com
Bernstein Research	Toni M. Sacconaghi Jr	sacconaghi@bernstein.com

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Primary Input Data

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Derived Input Data

Derived Input	Label	2015 Value	2016 Value	Equational Form
Net Operating Profit Less Adjusted Taxes	NOPLAT	9,862	8,010	$NOPLAT\, =\, EBIT\, x\, (1 \,-\, Avg \,\,Tax\,\, Rate\,\, on\,\, EBIT)$
Free Cash Flow	FCF	13,429	13,391	$FCF\,=NOPLAT\,+\,Non-Cash\,Expenses-\Delta NWC\,-\,NCS$
Tax Shield	TS	93	28	$TS\,=\,Interest\,\,Paid\,\,x\,\, Avg \,\,Tax\,\,Rate\,\, on\,\, Pre-Tax\,\, Income$
Invested Capital	IC	76,226	81,195	$IC\,=\,Fixed\,\,Operating\,\,Assets\,\,+\,\,Net\,\, Working\,\, Capital$
Return on Invested Capital	ROIC	12.94%	9.87%	$ROIC\,=\,\frac { NOPLAT }{ IC }$
Net Investment	NetInv	2,149	9,350	$NetInv\,=\,{ {IC}_{1}}-{{IC}_{0}}+Depreciation$
Investment Rate	IR	21.79%	116.73%	$IR\,=\,\frac {NetInv}{NOPLAT}$
Weighted Average Cost of Capital	WACC_Market	11.60%	12.32%	$WACC\,=\,\frac { E }{ V } { R }_{ E }\,+\,\frac { P }{ V } { R }_{ P }\,+\,\frac { D }{ V } { R }_{ D }\left( 1- Avg\,\, Tax\,\,Rate\,\,on\,\,Pre-Tax\,\,Income \right)$
Weighted Average Cost of Capital	WACC_Book	6.79%	7.77%
Enterprise value	EV_Market	163,742	189,867	$EV\,=\,Market\,\,Cap\,\,Equity\,+\,\,Long\,\,Term\,\,Debt\,-\,Cash$
Enterprise value	EV_Book	158,138	183,133
Long-Run Growth	g = IR x ROIC	2.82%	11.52%	Long-run growth rates of the income variable are used in the Continuing Value portion of the valuation models.
Long-Run Growth	g = % $\Delta$ GDP	2.50%	2.50%
Margin from Operations	M	18.56%	15.42%	$M\,\,=\,\,\frac{EBIT}{SALES}$
Depreciation/Amortization Rate	D	20.26%	26.23%	$D\,\,=\,\,\frac{D+A}{EBITDA}$

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Valuation Multiple Outcomes

The outcomes presented in this study are the result of original input data, derived data, and synthesized inputs.

Equational Form	Observed Value		Single-stage multiple g solution		Two-stage valuation model g solution
Equational Form	12/31/2015	12/31/2016	12/31/2015	12/31/2016	12/31/2015	12/31/2016
EV/SALES $\frac {EV}{Sales} \,= \,\frac{ROIC\, -\, g}{ROIC\,(WACC\,-\,g)}\,(1\,-\,T)\,(M)$	2.00	2.38	10.44%	14.15%	10.60%	13.58%
EV/EBITDA $\frac {EV}{EBITDA} \,= \,\frac{ROIC\, -\, g}{ROIC\,(WACC\,-\,g)}\,(1\,-\,T)\,(1\,-\,D)$	8.61	11.37	10.44%	14.15%	10.60%	13.58%
EV/NOPLAT $\frac {EV}{NOPLAT} \,= \,\frac{ROIC\, -\, g}{ROIC\,(WACC\,-\,g)}$	16.60	23.70	10.44%	14.15%	10.60%	13.58%
EV/FCF_OPS $\frac {EV}{FCF_{OPS}} \,= \,\frac{ROIC\, -\, g}{ROIC\,(WACC\,-\,g)}\,(1\,-\,T)$	12.19	14.18	10.44%	14.15%	10.60%	13.58%
EV/EBIT $\frac {EV}{EBIT} \,= \,\frac{ROIC\, -\, g}{ROIC\,(WACC\,-\,g)}\,(1\,-\,T)$	10.79	15.41	10.44%	14.15%	10.60%	13.58%
EV/IC $\frac {EV}{IC} \,= \,\frac{ROIC\, -\, g}{WACC\,-\,g}$	2.15	2.34	10.44%	14.15%	10.60%	13.58%

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