Head to Head Review: International Business Machines (IBM) and Gartner (IT)

International Business Machines (NYSE: IBM) and Gartner (NYSE:IT) are both large-cap computer and technology companies, but which is the superior investment? We will compare the two businesses based on the strength of their risk, earnings, profitability, dividends, analyst recommendations, valuation and institutional ownership.

Dividends

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International Business Machines pays an annual dividend of $6.00 per share and has a dividend yield of 3.8%. Gartner does not pay a dividend. International Business Machines pays out 98.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. International Business Machines has increased its dividend for 18 consecutive years.

Institutional and Insider Ownership

57.0% of International Business Machines shares are owned by institutional investors. Comparatively, 96.8% of Gartner shares are owned by institutional investors. 0.2% of International Business Machines shares are owned by insiders. Comparatively, 4.3% of Gartner shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Valuation & Earnings

This table compares International Business Machines and Gartner’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
International Business Machines $79.14 billion 1.83 $5.75 billion $6.11 25.66
Gartner $3.31 billion 3.41 $3.27 million $0.03 4,139.00

International Business Machines has higher revenue and earnings than Gartner. International Business Machines is trading at a lower price-to-earnings ratio than Gartner, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of recent ratings and price targets for International Business Machines and Gartner, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
International Business Machines 5 14 9 0 2.14
Gartner 0 2 6 1 2.89

International Business Machines presently has a consensus price target of $165.95, indicating a potential upside of 5.83%. Gartner has a consensus price target of $137.11, indicating a potential upside of 10.42%. Given Gartner’s stronger consensus rating and higher possible upside, analysts clearly believe Gartner is more favorable than International Business Machines.

Risk & Volatility

International Business Machines has a beta of 0.94, indicating that its share price is 6% less volatile than the S&P 500. Comparatively, Gartner has a beta of 1.22, indicating that its share price is 22% more volatile than the S&P 500.

Profitability

This table compares International Business Machines and Gartner’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
International Business Machines 7.27% 69.48% 10.67%
Gartner 0.10% 42.47% 4.83%

International Business Machines Company Profile

International Business Machines Corporation (IBM) is a technology company. The Company operates through five segments: Cognitive Solutions, Global Business Services (GBS), Technology Services & Cloud Platforms, Systems and Global Financing. The Cognitive Solutions segment delivers a spectrum of capabilities, from descriptive, predictive and prescriptive analytics to cognitive systems. Cognitive Solutions includes Watson, a cognitive computing platform that has the ability to interact in natural language, process big data, and learn from interactions with people and computers. The GBS segment provides clients with consulting, application management services and global process services. The Technology Services & Cloud Platforms segment provides information technology infrastructure services. The Systems segment provides clients with infrastructure technologies. The Global Financing segment includes client financing, commercial financing, and remanufacturing and remarketing.

Gartner Company Profile

Gartner, Inc. is an information technology research and advisory company. The Company works with clients to research, analyze and interpret the business of information technology (IT), supply chain and marketing within the context of their individual roles. It operates in three segments: Research, Consulting and Events. Research segment consists of subscription-based research products, access to research inquiry, peer networking services and membership programs. Consulting segment consists of consulting, measurement engagements and strategic advisory services. Events segment consists of various symposia, conferences and exhibitions. It provides insight through reports, briefings, tools, access to its analysts, peer networking services and membership programs that enable its clients to make decisions about their IT, supply chain and digital marketing initiatives. Its consultants provide fact-based consulting services to help clients use and manage IT to optimize business performance.

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