Investment Thesis for International Business Machines Corp.

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Date
2016-11
Journal Title
Journal ISSN
Volume Title
Publisher
Institute for Applied Economics, Global Health, and the Study of Business Enterprise
Abstract
The working paper is an in-depth financial analysis of International Business Machines (IBM). Our analysis examines the change in IBM’s business from a traditional hardware and software services provider to a cognitive services and cloud platform company. This analysis is combined with our proprietary Discounted Cash Flow (P-DCF) model and a Monte-Carlo simulation. This results in distributions of probable free cash flows. In addition to these quantitative factors, we also examine compensation plans of IBM executives to assess the degree to which the executives’ compensation incentives are aligned with the objective of creating shareholder value.
Description
The Studies in Applied Finance series is under the general direction of Prof. Steve H. Hanke, Co-Director of the Johns Hopkins Institute for Applied Economics, Global Health, and Study of Business Enterprise (hanke@jhu.edu) and Dr. Hesam Motlagh (hesamnmotlagh@gmail.com), a Fellow at the Johns Hopkins Institute for Applied Economics, Global Health, and Study of Business Enterprise. This working paper is one in a series on applied financial economics, which focuses on company valuations. The authors are mainly students at the Johns Hopkins University in Baltimore who have conducted their work at the Institute as undergraduate researchers.
Keywords
finance, investment thesis, IBM, International Business Machines, Watson, discounted cash flow, free cash flow, Monte-Carlo simulations, comparable companies analysis, management compensation
Citation