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Debasis	Chakraborty	International	Business	School			Company	Valuation		
1.Introduction
This paper is based on deep researc...
Debasis	Chakraborty	International	Business	School			Company	Valuation		
IBM Ratios & Returns
Price-to-sales 2.10
Return on...
Debasis	Chakraborty	International	Business	School			Company	Valuation		
5.1 Investment Highlight
IBM has stable earning an...
Debasis	Chakraborty	International	Business	School			Company	Valuation		
7.Appendix:
Ext 1 Quality Rating of Company
Ext 2 ...
Debasis	Chakraborty	International	Business	School			Company	Valuation		
Ext 5 BrandZ Top 10 Most Valuable Brand 2012
IBM S...
Debasis	Chakraborty	International	Business	School			Company	Valuation		
Ext 9 Return Of Investment Capital
Ext 10 Weighted...
Debasis	Chakraborty	International	Business	School			Company	Valuation		
Ext 13 Valuation Breakdown
Ext 14 Graph: Range of ...
Debasis	Chakraborty	International	Business	School			Company	Valuation		
Ext 17 Pre Form Balance Sheet
Ext 18 Pre Form Cash...
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Company valuation debasis chakraborty emba 2014 403503

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Company valuation debasis chakraborty emba 2014 403503

  1. 1. Debasis Chakraborty International Business School Company Valuation 1.Introduction This paper is based on deep research on the market as well as through analysis of the success of 100 years blue chip Company. Being an IBMer, I have highlighted various insight factors behind IBM's market value. Warren Buffett has recently purchased IBM share values of more than $10.6 Billion.IBM has maintained its global band value for last 100 years through its deeper innovation, repudiation, leadership in technology and services, patents and customer satisfaction. Exhibit 4 and 5 provides the band value of IBM. Exhibit 6 provides the IBM’s current values, assets and employees strength. 2.Management Summary IBM is one of the Top Technology firms at wall street.IBM has very strategic and matured organisation structure with a diverse set of the talent pool. It has five major wings such as SWG, GBS, Research Lab, GTS, and Financial Management. SWG is purely focused on software and licensing, GBS is on services and delivery, GTS is on IT infrastructure and Financial Management is on Financial and Securities. IBM has branches worldwide, and employees are more than four hundred thousand. During the dot-com bubble, the company share started with close $50 and last five years it has been recovered well and share value close to $200. 3.Valuation Strategy There is six critical methodology that comes part of company valuation is a balance sheet, income statement, cash flow discounting, a mixture of goodwill and repudiation, value creation and stock options. The seller strategy should be the min price she/he should be prepared to sell for and for the buyer, it should be the max amount he/she is willing to bid for. The essential part of any business measured concerning its earning, in other words, its free cash flow. 4.Analysis To analysis the above in details, we need to go through the following points such as Present Value (PV), Net Present Value (NPV), Weighted Average Cost of Capital (WACC), Capital budgeting, discount factors, free cash flow, present of horizon value. The future value is calculated using the following equation such as Future Value = Present Value (1 + Rate of Interest) number of year (n) and Cash flow = benefit – Costs Discount Factor = 1/ (1+r) t where r= discount rate; t= year 5.Valuation Approaches IBM price approached will be based on the above methods we maintained earlier such as balance sheet, income statement, Quality, economic profit, cash flow discounting, a mixture of goodwill and repudiation, value creation and stock options.
  2. 2. Debasis Chakraborty International Business School Company Valuation IBM Ratios & Returns Price-to-sales 2.10 Return on Equity 75.50 Operating Margin 23.50 Profit Margin 15.50% IBM Financials Sales $104.689 bil Profits $16.261 bil Assets $115.778 bil Employees 433362.0 Price $ 194.45 Change1.57 Open $194.15 % Change0.8% Previous Close $192.88 Volume3,880,667 Market Value 220 Bn P/E Ratio14.0 Bid $ 194.70 EPS13.90 Ask $194.94 Dividend3.40 High $195.00 Yield1.7 Low $192.90 Shares Out1.13 Bn 52wk High $211.79 52wk Low177.35 Industry: Diversified Computer Systems Current Valuation Ratios - International Business Machines International Business Machines Corp. Technology Selected Financial Data Current share price (P) $ 194.45 No. shares of common stock outstanding 1,158,661,712 Growth rate (g) 51.65% Earnings per share (EPS) $ 13.68 Next year expected EPS $ 20.75 Operating profit per share $ 18.46 Sales per share $ 92.28 Book value per share (BVPS) $ 17.38 Ratios (Price Multiples) Price to earnings (P/E) 14.21 12.40 Price to next year expected earnings 9.37 10.42 Price-earnings-growth (PEG) 0.28 0.65 Price to operating profit (P/OP) 10.53 9.67 Price to sales (P/S) 2.11 1.99 Price to book value (P/BV) 11.19 3.35
  3. 3. Debasis Chakraborty International Business School Company Valuation 5.1 Investment Highlight IBM has stable earning and continuous value Creation Organization and most prestigious brand in this decade. The exhibit 7 provides the investment consideration, and the generating economic value for the shareholder is very high and very stable and healthily cash flow, operating profit, net profit for consecutive last five years. IBM has an excellent combination of high free cash flow generation and low financial leverage. The market expectation is firm’s free cash flow margin to average about 17.2% in coming years. IBM has aggressive plans to reach $20 in operating earnings per share by 2015 via a combination of revenue expansion, operating leverage, and share repurchases. 5.2 Quality Exhibit 8 will provide the business quality of the International Business Machine. 5.3 Economic Profit Analysis The best way to measure a firm's ability to create value for shareholders expressed by comparing its return on invested capital (ROIC) with its weighted average cost of capital (WACC). The gap or difference between ROIC and WACC is called the firm's economic profit spread. IBM's 3-year historical return on invested capital (without goodwill) is 55.9%, which is above the estimate of its cost of capital of 9.2%.IBM’s value creation rating is EXCELLENT. Exhibit 9 & 10 has provided the organisation's value for ROIC and WACC. 5.4 Cash Flow Analysis Exhibit 11 stipulates that IBM has robust and healthy cash flow consecutive last three years. 5.5 Valuation Analysis The discounted cash flow model indicates that IBM's each share is worth between $166.00 - $250.00.The margin of safety around our fair value estimate driven by the firm's low-value risk rating, which derived from the historical volatility of the primary valuation drivers. 5.6 Future Path of Fair Value Referring the exhibit 15, the expected fair value of $263 per share in Year 3 represents our existing fair value per share of $208 increased at an annual rate of the firm's cost of equity less its dividend yield. 5.7 Cash Flow, Income Statement and Balance sheet Exhibit 16 to 18 provided the Balance sheet analysis, Cash flow statement and income statement. 6.Conclusion In an earlier section, we have provided them with enough information to present the IBM's value, and we have discussed IBM's cash flow analysis, valuation analysis, Quality, the future path of fair value, investment highlight, economic profit analysis, cash flow statement, balance sheet, income statement. IBM is rated top valued and highly innovative organisation in wall streets, and it has high employee and customer retention.
  4. 4. Debasis Chakraborty International Business School Company Valuation 7.Appendix: Ext 1 Quality Rating of Company Ext 2 Valuation Statistics Ext 3: IBM’s Intrinsic Value Vs. Share-Price stats Ext 4: Most Valuable Global Brands
  5. 5. Debasis Chakraborty International Business School Company Valuation Ext 5 BrandZ Top 10 Most Valuable Brand 2012 IBM Statistics: Market Cab Employee 433,362 (2012) Revenue US$ 106.91 billion (2012) Operating income US$ 20.28 billion (2012) Net income US$ 15.85 billion (2012) Total assets US$ 116.43 billion (2012) Total equity US$ 20.13 billion (2012) Ext 6 IBM Statistics: Market Cab Ext 8 IBM’s Relative Valuation and Financial Summary Ext 7 Investment Consideration
  6. 6. Debasis Chakraborty International Business School Company Valuation Ext 9 Return Of Investment Capital Ext 10 Weighted Average Cost Of Capitals Ext 11 Cash Flow Generation Ext 12 Valuation Projection for next 5 Year
  7. 7. Debasis Chakraborty International Business School Company Valuation Ext 13 Valuation Breakdown Ext 14 Graph: Range of Potential Outcomes Ext 15 Expected Fair Share values for Next three- year Ext 16 Pre Form Income Statement
  8. 8. Debasis Chakraborty International Business School Company Valuation Ext 17 Pre Form Balance Sheet Ext 18 Pre Form Cash Flow Statement

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