IBM vs Alphabet Which Is a Smarter Choice?

IBM and Alphabet are two technology giants that have been competing in the market for decades. IBM, a pioneer in computer technology, has a long history of innovation and success. On the other hand, Alphabet, the parent company of Google, has revolutionized the way we access information and communicate online. Both companies have seen growth in their stock prices over the years, but investors are constantly analyzing the performance of each to determine which stock is the better investment for the future.

IBM or Alphabet?

When comparing IBM and Alphabet, different investors may prioritize various metrics based on their investment strategies and goals. So, ask yourself what type of investor you are. This will guide you in determining which metrics are most important for your investment decision between IBM and Alphabet.

Dividend Investors:

Dividend investors look for stable and growing income streams, using dividend metrics to assess potential investments. A company's dividend yield essentially measures the size of its dividend relative to the total market value of the company. IBM has a dividend yield of 2.89%, while Alphabet has a dividend yield of 0.32%. Beyond the yield itself, considering the growth and sustainability of these dividends is also crucial. IBM reports a 5-year dividend growth of 1.32% year and a payout ratio of 95.65%. On the other hand, Alphabet reports a 5-year dividend growth of 0.00% year and a payout ratio of 5.22%.

Value Investors:

Value investors focus on financial metrics to determine a stock's intrinsic value compared to its market value. The Price-to-Earnings (P/E) Ratio links stock price to a company's earnings per share, with IBM P/E ratio at 33.21 and Alphabet's P/E ratio at 24.75. Another crucial valuation metric is the Price-to-Book (P/B) Ratio, which compares stock price with book value per share. IBM P/B ratio is 8.69 while Alphabet's P/B ratio is 7.43.

Growth Investors:

Growth investors prioritize metrics indicative of a company's expansion potential. Focusing on top-line growth, IBM has seen a 5-year revenue growth of -0.22%, while Alphabet's is 1.47%. Return on Equity (ROE) measures how effectively a company uses equity investment to generate earnings, with IBM's ROE at 27.14% and Alphabet's ROE at 31.66%.

Retail Investors:

Retail investors often consider stock affordability and company familiarity. For example, day low prices are $230.26 for IBM and $191.26 for Alphabet. Over the past year, IBM's prices ranged from $157.89 to $239.35, with a yearly change of 51.59%. Alphabet's prices fluctuated between $131.55 and $196.89, with a yearly change of 49.67%. Brand recognition also plays a role, as familiarity with a company can influence investment decisions.