DELL Soars 23% In A Single Month, Should You Buy The Stock?
We believe there is a near-equal mix of good and bad in DELL stock given its overall Moderate operating performance and financial condition. This is aligned with the stock’s Moderate valuation because of which we think it is Fairly Priced. Here is our multi-factor assessment.
| CONCLUSION | |
|---|---|
| What you pay: | |
| Valuation | Moderate |
| What you get: | |
| Growth | Inconsistent |
| Profitability | Very Weak |
| Financial Stability | Strong |
| Downturn Resilience | Moderate |
| Operating Performance | Moderate |
| Stock Opinion | Fairly Priced |
DELL stock has jumped meaningfully recently and we currently find it fairly priced. This may feel like a caution, and there is significant risk in relying on a single stock. However, there is a huge value to a broader diversified approach we take with Trefis High Quality Portfolio. Trefis works with Empirical Asset Management – a Boston area wealth manager – whose asset allocation strategies yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Empirical has incorporated the Trefis HQ Portfolio in this asset allocation framework to provide clients better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Let’s get into details of each of the assessed factors but before that, for quick background: With $102 Bil in market cap, Dell Technologies provides desktops, workstations, notebooks, displays, software, and peripherals, and supports hybrid cloud, modern applications, networking, security, and digital workspace solutions.
[1] Valuation Looks Moderate
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| DELL | S&P 500 | |
|---|---|---|
| Price-to-Sales Ratio | 1.0 | 3.3 |
| Price-to-Earnings Ratio | 20.8 | 23.9 |
| Price-to-Free Cash Flow Ratio | 21.0 | 21.1 |
This table highlights how DELL is valued vs broader market. For more details see: DELL Valuation Ratios
[2] Growth Is Inconsistent
- Dell Technologies has seen its top line shrink at an average rate of -1.3% over the last 3 years
- Its revenues have grown 10% from $92 Bil to $101 Bil in the last 12 months
- Also, its quarterly revenues grew 19.0% to $30 Bil in the most recent quarter from $25 Bil a year ago.
| DELL | S&P 500 | |
|---|---|---|
| 3-Year Average | -1.3% | 5.3% |
| Latest Twelve Months* | 10.5% | 5.2% |
| Most Recent Quarter (YoY)* | 19.0% | 6.1% |
This table highlights how DELL is growing vs broader market. For more details see: DELL Revenue Comparison
[3] Profitability Appears Very Weak
- DELL last 12 month operating income was $6.9 Bil representing operating margin of 6.8%
- With cash flow margin of 7.4%, it generated nearly $7.5 Bil in operating cash flow over this period
- For the same period, DELL generated nearly $4.9 Bil in net income, suggesting net margin of about 4.8%
| DELL | S&P 500 | |
|---|---|---|
| Current Operating Margin | 6.8% | 18.6% |
| Current OCF Margin | 7.4% | 20.3% |
| Current Net Income Margin | 4.8% | 12.6% |
This table highlights how DELL profitability vs broader market. For more details see: DELL Operating Income Comparison
[4] Financial Stability Looks Strong
- DELL Debt was $29 Bil at the end of the most recent quarter, while its current Market Cap is $102 Bil. This implies Debt-to-Equity Ratio of 28.1%
- DELL Cash (including cash equivalents) makes up $8.1 Bil of $89 Bil in total Assets. This yields a Cash-to-Assets Ratio of 9.1%
| DELL | S&P 500 | |
|---|---|---|
| Current Debt-to-Equity Ratio | 28.1% | 20.9% |
| Current Cash-to-Assets Ratio | 9.1% | 7.0% |
[4] Downturn Resilience Is Moderate
DELL saw an impact slightly better than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.
2022 Inflation Shock
- DELL stock fell 44.4% from a high of $60.77 on 9 February 2022 to $33.77 on 12 October 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 1 September 2023
- Since then, the stock increased to a high of $179.21 on 29 May 2024 , and currently trades at $150.87
| DELL | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -44.4% | -25.4% |
| Time to Full Recovery | 324 days | 464 days |
2020 Covid Pandemic
- DELL stock fell 45.9% from a high of $26.87 on 19 February 2020 to $14.54 on 18 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 29 June 2020
| DELL | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -45.9% | -33.9% |
| Time to Full Recovery | 103 days | 148 days |
But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read DELL Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.