Which Big Data Stock is a Better Buy?

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International Business Machines Corporation (IBM), in Armonk, New York, provides integrated solutions and services worldwide. The company operates through five segments: Cloud & Cognitive Software; Global business services; Global technology services; Systems; and global funding. For comparison, Alteryx, Inc. (AYX) in Irvine, Calif., provides an end-to-end analytics platform for data analysts and scientists around the world. The company also offers a cloud-based collaboration offering that allows users to share workflows in a centralized repository.

The market for large-scale analytics and intelligent automation services has generated robust growth in recent years. Global Big Data Market Expected To Reach $ 234.6 Billion By 2026, Growing at a CAGR of 10.2%. In addition, the big data market in the United States is expected to reach $ 50.1 billion this year. The industry’s robust growth outlook is expected to boost performance for both IBM and AYX over the coming months.

IBM stock has gained 3.1% in price over the past six months, while AYX has lost 17.7% in that period. Additionally, IBM’s 7% year-to-date gains compare to AYX’s 42.6% drop. And in terms of last year’s performance, IBM is the big winner with gains of 11.7% against AYX’s 36.8% drop.

Click here to view our Software Industry Report for 2021

But which stock is a better buy now? Let’s find out.

Latest development

On September 8, IBM unveiled its new IBM Power E1080 server, the first in a new family of servers specifically designed for hybrid cloud environments. Given the accelerated adoption of hybrid cloud infrastructure in the IT space, this launch is expected to be a success in the market.

On July 30, AYX announced that the company has become an elite technology partner of Snowflake Inc. (SNOW) Partner network to accelerate data science analysis and automation for global organizations. “Our expanded partnership which includes Snowflake Partner Connect and Snowpark provides exceptional ease of use for business users and citizen data scientists with a single integrated solution for high performance analytics and machine learning,” said Nitin Brahmankar, Vice President, ISV & Global Partner Ecosystem, Alteryx.

Recent financial results

IBM’s total revenue rose 3.4% year-on-year to $ 18.75 billion in its fiscal second quarter, ended June 30. Its gross profit rose 3.5% from its value a year ago to $ 9.00 billion. Its non-GAAP income from continuing operations was $ 2.10 billion, reflecting a 7.9% year-over-year increase. The company’s non-GAAP EPS increased 6.9% year-over-year to $ 2.33.

AYX’s revenue increased 25% year-over-year to $ 120.07 million in its fiscal second quarter, ended June 30. Its gross profit rose 23.7% from its value a year ago to $ 107.14 million. AYX’s net loss increased 23.1% year-on-year to $ 43.44 million, while the company’s net loss per share increased 22.6% year-on-year to 0.65 $.

Past and expected financial performance

IBM’s leveraged FCF has grown at a CAGR of 36.9% over the past three years. Analysts expect IBM’s revenue to grow 1.7% in the next quarter, 2% this year and 1.6% next year. The company’s EPS is expected to grow 102.4% in the next quarter, 23.8% in the current year, and 9.9% in the next year. In addition, its EPS is expected to grow at a rate of 16.4% per year over the next five years.

By comparison, AYX’s leveraged FCF has grown at a CAGR of 28.1% over the past three years. Analysts expect the company’s revenue to grow 2.6% in the next quarter, 6.4% for the current year and 18.2% for next year. The company’s EPS is expected to decline 72.6% in the next quarter and 118.1% in the current year. However, its EPS is expected to grow 147.1% next year. In addition, AYX’s EPS is expected to decline at a rate of 23.3% per year over the next five years.

Profitability

IBM is more profitable, with EBITDA and net margins of 21.49% and 7.17%, respectively, compared to negative 3.01% and 10.91% for AYX.

Additionally, IBM’s ROE, ROA, and ROTC of 24.53%, 3.84%, and 6.72%, respectively, compare to negatives of 13.72%, 1.34%, and 1.53% d ‘AYX.

Thus, IBM is more profitable.

Evaluation

In terms of advance VE / Sales, AYX is currently trading at 9.27x, which is 75.4% higher than IBM, which is currently trading at 2.28x. Additionally, AYX’s advanced EV / EBITDA ratio of 839.29 is significantly higher than IBM’s of 9.03.

So IBM is relatively affordable here.

POWR odds

IBM has an overall rating of B, which is equivalent to Buying in Our Property POWR odds system. In contrast, AYX has an overall rating of C, which translates to Neutral. POWR scores are calculated taking into account 118 separate factors, each factor being weighted to an optimal degree.

IBM has a B grade for quality, due to its higher profit margins than the industry. IBM’s leveraged FCF margin of 18.33% is 47.6% higher than the industry average of 12.41%. In comparison, AYX has a C grade for quality. This is justified because AYX’s 13.17% leveraged FCF margin is 6.1% above the industry average of 12.41%. IBM has a stability rating of C, which corresponds to its beta version of 0.97. In contrast, AYX has a D stability rating, which is in line with its relatively high 1.35 beta.

Out of the 46 B-rated stocks Technology – Material industry, IBM is ranked No. 7. Alternatively, among the 149 D-rated stocks Software application industry, AYX is ranked # 88.

Beyond what we’ve stated above, we’ve also rated stocks for Sentiment, Momentum, Value, and Growth. Click here to view IBM ratings. Also get all AYX ratings here.

Click here to view our Software Industry Report for 2021

The winner

IBM and AYX are both well positioned to take advantage of the growing market for data and analytics. However, we believe its higher profitability and lower valuation makes IBM the best buy here.

Our research shows that the chances of success increase when investing in stocks with an overall strong buy or buy rating. See all the top rated stocks in the Technology – Hardware sector here. Also, here to view the highest rated stocks in the Software – Applications industry.


IBM shares were unchanged on Thursday after trading hours. Year-to-date, IBM has gained 12.58%, compared to 19.69% for the benchmark S&P 500 during the same period.

About the Author: Subhasree Kar

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After obtaining a master’s degree in economics, she acquired knowledge in equity research and portfolio management at Finlatics. Following…

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