Is IBM a Good Stock to Buy?

We can also compare IBM to large technology companies Microsoft Corporation (NASDAQ:MSFT) and to Intel Corporation (NASDAQ:INTC). Microsoft trades at 9 times forward earnings estimates for the fiscal year ending in June 2014, but that’s not particularly low- it’s actually about even with Apple’s forward P/E- and earnings are likely to be temporarily higher from sales of new versions of Windows and Office. So we would not be too excited about that company right now. Intel’s business may be in the worst position of the companies we’ve discussed, with earnings that dropped over 25% last quarter compared to the fourth quarter of 2011. With low earnings multiples and a dividend yield over 4%, however, it’s another stock where the market might be being too pessimistic.

Still, Intel does not trade at too much of a discount to IBM and that company appears to be much more secure in terms of its business conditions. Unless the yield is a significant factor IBM might be a better buy. Hewlett-Packard has not been doing well either but we think that the market is running strongly enough against it that it might make for a contrarian play, and so we would spend at least some time trying to determine how its earnings might unfold over the next couple years.

Disclosure: I own no shares of any stocks mentioned in this article.