IBM (IBM) is looking very good right now.
One-Year Chart
Profit growth was 18% last quarter, solid for a mature company. Sales rose 12%, another big number.
IBM stock has been on the rise for the last twelve months, and with a reasonable P/E of 14, the stock still has legs. This company is using a good economy to make money. Yes, I said good economy — 12% sales growth proves this economy is better than many people think.
Estimates for t he next two quarters look OK, with 14% and 11% growth expected. IBM has beaten the street in each of the last four quarters, so don’t underestimate the power of Big Blue. Annual Profit Estimates increased during each of the last two quarters.
Fair Value
I think IBM’s worth 16 times earnings. It may get to a P/E of 18 if this market keeps up.
Fair Value with this stock is solid for a Blue Chip. Big Blue is set set to get bigger. If it does, it along with undervalued Microsoft (MSFT) and Exxon (XOM) could push the DJIA to and All-Time high. Blue chips are cheap.
Bottom Line
Although the stock market is currently in a correction, the market’s been good to growth stocks for two years. I feel the solid Blue Chip stocks like IBM will be the market leaders in 2011 and 2012.
Why don’t I own it? I like companies that can grow at 20-30% a year for three-to-five years. Last year when I considered buying this stock for clients, I didn’t think 20% plus growth was possible for the long term, so I passed.
I could buy IBM now — it looks very good — but there are a handful of fast growing companies I missed as they went up that I prefer over Big Blue. IBM stays on the radar. At this juncture, there are faster growing stocks. IBM is a great stock for conservative accounts.
View the Earnings Table here.
View the Ten-Year Chart here.
Disclosure: Clients of DavidSharek.com owned shares of IBM at the time of publication.
