Over the past six months, Dell has been a great trade, beating the S&P 500 by 30%. Its stock price has climbed to $211.05, representing a healthy 36.5% increase. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is it too late to buy DELL? Find out in our full research report, it’s free.
Why Are We Positive On DELL?
Founded by Michael Dell in his University of Texas dorm room in 1984 with just $1,000, Dell Technologies (NYSE: DELL) provides hardware, software, and services that help organizations build their IT infrastructure, manage cloud environments, and enable digital transformation.
1. Long-Term Revenue Growth Shows Momentum
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Dell grew its sales at a decent 5.5% compounded annual growth rate. Its growth was slightly above the average business services company and shows its offerings resonate with customers.
2. EPS Surges Higher Over the Last Two Years
While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.
Dell’s EPS grew at an astounding 20.5% compounded annual growth rate over the last two years, higher than its 13.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. New Investments Bear Fruit as ROIC Jumps
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Dell’s ROIC has increased significantly. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.
Final Judgment
These are just a few reasons why we think Dell is a great business, and with its shares outperforming the market lately, the stock trades at 16.2× forward P/E (or $211.05 per share). Is now the right time to buy? See for yourself in our full research report, it’s free.
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