IBM Is Looking Cheap

One thing investors hate is stocks with high nominal prices. This is a fear they should learn to overcome. With the advent of discount brokers, acquiring a small number of shares in a high-priced stock is hardly a burden.

I’m beginning to like IBM ($IBM). Despite its $195 stock price, IBM is quite reasonable. The stock is currently going for less than 11 times next year’s earnings estimate. IBM was punished earlier this year after the company missed earnings for the first quarter.

IBM has largely sat out the phase of the rally that began in October 2011. Over that time, the S&P 500 is up 49% while IBM is up just 12%. Check out this chart below and notice how IBM’s P/E Ratio (the bottom box) has trended downward while the rest of the market’s valuation has risen.

Posted by Eddy Elfenbein on July 8th, 2013 at 10:06 am

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