Buffett Brain · Research note
Score updated 22 Oct 2026 · analysis from 2 Jun 2026
IBM· Technology
IBM
IBM is a century-old franchise reinventing itself around software, but at 23.1 times earnings the market is paying for a turnaround that has barely begun.
Buffett fit
Partial fit
Owner
40
Durability
59
Management
64
Price
35
Score updated 22 Oct 2026 · analysis from 2 Jun 2026
Buffett's checklist
Each number against Buffett's bar, and where it ranks among Technology stocks in our database.
How much profit the business makes on each dollar invested in it. Higher is better.
What is left of each sale after the cost of making the product. A high number often means pricing power.
The cash the business earns for its owners, compared with the price of the whole company.
How fast sales grew each year over the last five years.
How many years of today's profit you pay for at today's price. Lower means cheaper.
How much the company owes compared with what it owns outright. Lower is safer.
The four pillars
How the business measures up on each of Buffett's four tests.
If I owned all of IBM I would respect the 58.97 percent and the cash it throws off, with at 1.09 times reported earnings, which tells me the profits are real and not an accounting mirage.
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The customer relationships are durable, and that is reflected in a durability score of 59 and revenue that still grows, if slowly, at 4.17 percent.
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Management earns my respect here, with a management score of 64. They have grown earnings per share 15.38 percent while barely diluting owners, with the share count creeping up only 1 percent a year, and they have steered the mix toward higher-value software.
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There is no at today's price, and that is the heart of why this is unclear.
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For and against
The strongest points on each side, with the numbers behind them.
In its favor
6- 1High and stable of 58.97 percent shows real pricing discipline in core software and services.
- 2 runs at 1.09 times net income, so reported earnings convert cleanly into spendable cash.
- 3Earnings per share have compounded at 15.38 percent even as revenue grew only 4.17 percent, evidence of disciplined cost and mix management.
- 4Management has avoided dilution, with the share count rising just 1 percent annually, treating owners fairly.
Concerns
7- 1Valuation leaves no room for error: a 23.1 and a 29.84 EV/ for a business growing revenue at only 4.17 percent means you are paying up for modest growth.
- 2The balance sheet is heavily levered, with debt at 2.14 times equity and net debt at 3.66 times EBITDA, which limits flexibility.
- 3Liquidity is tight, with a current ratio of 0.80, meaning short-term obligations exceed short-term assets.
- 4Returns on capital are mediocre, with at 8.92 percent and a five-year average of only 7.33 percent, barely above the cost of capital.
Price history
$252+110.8%· 5-year return
Weekly closing prices. Touch or hover the line for a date.
The business
How the business works
IBM sells enterprise software, consulting, and infrastructure to large institutions that prize reliability over novelty, and it earns a 58.97 percent and a 16.36 percent doing it. The trouble is the engine spins slowly. Revenue has compounded at just 4.17 percent, so most of the 15.38 percent earnings growth comes from cost discipline and the mix shift toward software, not from a business that is genuinely getting bigger.
How this analysis has moved
The call has held across 5 reviews.
Sep 27, 2026 → Oct 22, 2026
What other investors would say
The same company, judged by three other documented playbooks.
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