International Business Machines (IBM)
Profitability ratios
Return on sales
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Gross profit margin | 56.65% | 55.45% | 54.00% | 54.90% | 55.94% |
| Operating profit margin | 9.40% | 11.28% | 10.59% | 8.35% | 8.35% |
| Pretax margin | 9.25% | 14.03% | 1.67% | 10.23% | 7.67% |
| Net profit margin | 9.60% | 12.13% | 2.71% | 10.01% | 10.13% |
International Business Machines has shown a consistent gross profit margin over the period from December 31, 2020, to December 31, 2024, with a slight decrease from 55.94% in 2020 to 54.90% in 2021 and then gradually improving to 56.65% by the end of 2024. This indicates that IBM has been effectively managing its cost of goods sold relative to its revenue.
In terms of operating profit margin, IBM had a steady performance from 2020 to 2021 at 8.35%. There was a notable improvement in 2022 to 10.59%, followed by a further increase to 11.28% in 2023. However, there was a decrease to 9.40% by the end of 2024. This suggests that while IBM was able to generate more profit from its core operations in the middle years of the period, there was a decline in operating efficiency in 2024.
The pretax margin for IBM fluctuated significantly over the period. There was a substantial increase from 7.67% in 2020 to 10.23% in 2021, followed by a sharp decrease to 1.67% in 2022. The pretax margin recovered strongly to 14.03% in 2023 before dropping to 9.25% in 2024. These fluctuations indicate varying levels of pre-tax profitability and efficiency in IBM's operations over the years.
Lastly, the net profit margin of IBM saw some fluctuations as well. It remained relatively stable at around 10% in 2020 and 2021 before dropping to 2.71% in 2022, indicating a significant impact on net profitability. However, there was a notable recovery to 12.13% in 2023, followed by a decrease to 9.60% in 2024. This indicates that while IBM's bottom line was impacted significantly in 2022, there was a strong rebound in profitability in 2023, albeit tapering off slightly in 2024.
Overall, IBM's profitability ratios show a mixed performance over the years, with fluctuations in different margins reflecting varying levels of efficiency and profitability in different periods.
Return on investment
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Operating return on assets (Operating ROA) | 4.30% | 5.16% | 5.04% | 3.63% | 2.96% |
| Return on assets (ROA) | 4.39% | 5.55% | 1.29% | 4.35% | 3.58% |
| Return on total capital | 9.74% | 14.16% | 3.27% | 11.00% | 7.38% |
| Return on equity (ROE) | 22.06% | 33.29% | 7.47% | 30.38% | 27.14% |
The profitability ratios of International Business Machines (IBM) indicate varying levels of financial performance over the years.
1. Operating return on assets (Operating ROA) has shown a positive trend, increasing from 2.96% in 2020 to 5.16% in 2023, indicating that IBM is utilizing its assets more efficiently to generate operating income.
2. Return on assets (ROA) experienced fluctuations, with a significant drop to 1.29% in 2022, but it bounced back to 5.55% in 2023. This ratio reflects how effectively IBM is generating profit from its total assets.
3. Return on total capital initially rose from 7.38% in 2020 to 11.00% in 2021, signaling better utilization of both debt and equity capital. However, it decreased in 2022 before reaching 14.16% in 2023, which suggests that IBM's profitability relative to its total capital has been improving.
4. Return on equity (ROE) also demonstrated fluctuations, peaking at 33.29% in 2023 from 27.14% in 2020. Although there was a drop in 2022, the ROE remained relatively high compared to the industry average, indicating that IBM is generating strong returns for its shareholders.
Overall, IBM's profitability ratios reflect a generally positive performance trend, with improvements in operational efficiency and returns on both assets and equity. However, some fluctuations in certain ratios suggest that IBM may need to continue monitoring and optimizing its financial performance to ensure sustainable profitability in the long run.