In addition to analyzing the benchmark comparison of IBM, we determined the sustainable and actual growth for the company. As expected, IBM?s results were extremely different from AEP?s. The sustainable growth for IBM was consistently higher than the actual growth rate (with the exception of 1995). These trends, which are opposite of AEP?s suggest that IBM had smaller dividend payouts to stockholders. In fact, IBM?s dividend payouts were 1.03% on average, compared to AEP?s payouts, which were 84.79%. This large gap reflects the strength and dominance of IBM compared to the AEP company, which is still in the growth process. The higher sustainable growth of IBM also reflects that IBM will have a greater chance at increasing their capabilities because of the increased assets that they can utilize in order to expand and grow.
The sustainable strength and growth of IBM, as observed in the analysis of sustainable growth, is intricately linked to IBM?s cash flows.
IBM has an extremely high cash flow ($5,328,650,000). As explained in AEP?s analysis, a company aims for large cash flows, for the available cash enables them to have more opportunity to grow and expand. The ability to invest in new prospects and expand with these assets creates a strong future for the company, for the constant growth is unsurpassable. With such high free cash flows, IBM?s possibilities for growing and expanding are unbounded.
IBM is the leader in its industry for many reasons. The analysis of IBM?s growth and cash flows enhance their strength and ability to take over the technical industry. Unlike AEP, IBM has strong cash flows and a steady growth that allows it to continually expand and augment its capabilities. IBM has very little room for improvement, for they have attained supremacy over their competitors.