Comparing International Business Machines (NYSE:IBM) & Infosys (NYSE:INFY)

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

Analyst Recommendations

This is a summary of recent ratings for Infosys and International Business Machines, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Infosys	1	10	0	0	1.91
International Business Machines	2	12	20	0	2.53

Infosys currently has a consensus target price of $11.45, suggesting a potential downside of 8.70%. International Business Machines has a consensus target price of $266.12, suggesting a potential upside of 4.09%. Given International Business Machines’ stronger consensus rating and higher probable upside, analysts clearly believe International Business Machines is more favorable than Infosys.

Valuation & Earnings

This table compares Infosys and International Business Machines”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Infosys	$20.16 billion	2.52	$3.31 billion	$0.81	15.49
International Business Machines	$67.53 billion	3.58	$10.59 billion	$11.73	21.80

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

Institutional and Insider Ownership

16.2% of Infosys shares are owned by institutional investors. Comparatively, 59.0% of International Business Machines shares are owned by institutional investors. 22.4% of Infosys shares are owned by company insiders. Comparatively, 0.3% of International Business Machines shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Dividends

Infosys pays an annual dividend of $0.45 per share and has a dividend yield of 3.6%. International Business Machines pays an annual dividend of $6.76 per share and has a dividend yield of 2.6%. Infosys pays out 55.6% of its earnings in the form of a dividend. International Business Machines pays out 57.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. International Business Machines has increased its dividend for 30 consecutive years. Infosys is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility & Risk

Infosys has a beta of 0.88, suggesting that its stock price is 12% less volatile than the S&P 500. Comparatively, International Business Machines has a beta of 0.73, suggesting that its stock price is 27% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Infosys	16.21%	35.52%	20.98%
International Business Machines	15.99%	34.37%	7.63%

Summary

International Business Machines beats Infosys on 10 of the 17 factors compared between the two stocks.

About Infosys

Infosys Ltd. is a digital services and consulting company, which engages in the provision of end-to-end business solutions. It operates through the following segments: Financial Services, Retail, Communication, Energy, Utilities, Resources, and Services, Manufacturing, Hi-Tech, Life Sciences, and All Other. The company was founded by Dinesh Krishnan Swamy, Senapathy Gopalakrishnan, Narayana Ramarao Nagavara Murthy, Raghavan N. S., Ashok Arora, Nandan M. Nilekani, and S. D. Shibulal on July 2, 1981 and is headquartered in Bangalore, India.

About International Business Machines

International Business Machines Corporation, together with its subsidiaries, provides integrated solutions and services worldwide. The company operates through Software, Consulting, Infrastructure, and Financing segments. The Software segment offers a hybrid cloud and AI platforms that allows clients to realize their digital and AI transformations across the applications, data, and environments in which they operate. The Consulting segment focuses on skills integration for strategy, experience, technology, and operations by domain and industry. The Infrastructure segment provides on-premises and cloud based server, and storage solutions, as well as life-cycle services for hybrid cloud infrastructure deployment. The Financing segment offers client and commercial financing, facilitates IBM clients’ acquisition of hardware, software, and services. The company has a strategic partnership to various companies including hyperscalers, service providers, global system integrators, and software and hardware vendors that includes Adobe, Amazon Web services, Microsoft, Oracle, Salesforce, Samsung Electronics and SAP, and others. The company was formerly known as Computing-Tabulating-Recording Co. International Business Machines Corporation was incorporated in 1911 and is headquartered in Armonk, New York.