Also, certain ratios can serve as important signals of deteriorating or improving business fundamentals that may not yet be reflected in reported earnings. The Revenue and Income Per Employee ratios, together with the Asset Turnover ratio, provide a sense of how labor intensive the company's operations are. Lower levels of Revenue and Net Income per Employee suggest greater degrees of labor intensity. IBM does have lower ratios for both of these categories. Asset turnover tells you how quickly the company is converting its physical asset base into sales.
Lower ratios suggest high degrees of capital intensity.
IBM's Asset Turnover is below the industry level, but above the economy level. It is okay that IBM is combining low turnover rates and has high margins. The mean expected annual earnings for IBM in the 2001 fiscal year is 5.00. By the Greenspan model, the stock is slightly overvalued at the present. The company has also been making huge profits in the past and many people may see this as an indication that the company will continue to do well in the future.