Contrasting IBM (IBM) & Mercury Systems (MRCY)

IBM (NYSE: IBM) and Mercury Systems (NASDAQ:MRCY) are both computer and technology companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitability, dividends, valuation, earnings, analyst recommendations, risk and institutional ownership.

Institutional & Insider Ownership

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57.0% of IBM shares are held by institutional investors. Comparatively, 93.5% of Mercury Systems shares are held by institutional investors. 0.2% of IBM shares are held by insiders. Comparatively, 3.5% of Mercury Systems shares are held 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.

Dividends

IBM pays an annual dividend of $6.00 per share and has a dividend yield of 4.0%. Mercury Systems does not pay a dividend. IBM pays out 43.5% of its earnings in the form of a dividend. IBM has increased its dividend for 18 consecutive years.

Volatility and Risk

IBM has a beta of 0.9, meaning that its stock price is 10% less volatile than the S&P 500. Comparatively, Mercury Systems has a beta of 0.36, meaning that its stock price is 64% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for IBM and Mercury Systems, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
IBM 5 14 9 0 2.14
Mercury Systems 0 2 4 0 2.67

IBM presently has a consensus target price of $165.95, indicating a potential upside of 10.21%. Mercury Systems has a consensus target price of $55.20, indicating a potential upside of 16.06%. Given Mercury Systems’ stronger consensus rating and higher possible upside, analysts plainly believe Mercury Systems is more favorable than IBM.

Profitability

This table compares IBM and Mercury Systems’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
IBM 7.27% 69.48% 10.67%
Mercury Systems 9.61% 6.32% 5.34%

Valuation & Earnings

This table compares IBM and Mercury Systems’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
IBM $79.14 billion 1.75 $5.75 billion $13.80 10.91
Mercury Systems $408.59 million 5.62 $24.87 million $0.95 50.06

IBM has higher revenue and earnings than Mercury Systems. IBM is trading at a lower price-to-earnings ratio than Mercury Systems, indicating that it is currently the more affordable of the two stocks.

Summary

IBM beats Mercury Systems on 9 of the 17 factors compared between the two stocks.

IBM Company Profile

International Business Machines Corporation operates as an integrated technology and services company worldwide. Its Cognitive Solutions segment offers Watson, a cognitive computing platform that interacts in natural language, processes big data, and learns from interactions with people and computers. This segment also offers data and analytics solutions, including analytics and data management platforms, cloud data services, enterprise social software, talent management solutions, and solutions tailored by industry; and transaction processing software that runs mission-critical systems in banking, airlines, and retail industries. The company's Global Business Services segment offers business consulting services; delivers system integration, application management, maintenance, and support services for packaged software applications; and finance, procurement, talent and engagement, and industry-specific business process outsourcing services. Its Technology Services & Cloud Platforms segment provides cloud, project-based, outsourcing, and other managed services for enterprise IT infrastructure environments. This segment also offers technical support, and software and solution support; and integration software solutions. The company's Systems segment offers servers for businesses, cloud service providers, and scientific computing organizations; data storage products and solutions; and z/OS, an enterprise operating system. Its Global Financing segment provides lease, installment payment plans, and loan financing services; short-term working capital financing to suppliers, distributors, and resellers; and remanufacturing and remarketing services. The company was formerly known as Computing-Tabulating-Recording Co. and changed its name to International Business Machines Corporation in 1924. International Business Machines Corporation was founded in 1911 and is headquartered in Armonk, New York.

Mercury Systems Company Profile

Mercury Systems, Inc. provides sensor and safety critical mission processing subsystems for various critical defense and intelligence programs in the United States. The company's products and solutions are deployed in approximately 300 programs with 25 defense prime contractors. Its principal programs include Aegis, Patriot, Surface Electronic Warfare Improvement Program, Gorgon Stare, Predator, F-35, Reaper, F-16 SABR, E2D Hawkeye, and Paveway. The company also designs, markets, and licenses software and middleware environments under the MultiCore Plus name to accelerate development and execution of signal and image processing applications on a range of heterogeneous and multi-computing platforms. In addition, it offers hardware products, including components, such as power amplifiers and limiters, switches, oscillators, filters, equalizers, digital and analog converters, chips, monolithic microwave integrated circuits, and memory and storage devices; embedded processing modules and boards, switch fabric boards, high speed input/output boards, digital receiver boards, multi-chip modules, integrated radio frequency and microwave multi-function assemblies, tuners, and transceivers, as well as graphics and video processing, and Ethernet and input-output boards; and integrated subsystems. The company was formerly known as Mercury Computer Systems, Inc. and changed its name to Mercury Systems, Inc. in November 2012. Mercury Systems, Inc. was founded in 1981 and is headquartered in Andover, Massachusetts.

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