There are very few technology stocks that are more unloved than Dell (DELL). It consistently exceeds earnings estimates, has over $7B in net cash on its balance sheet (over 25% of its market capitalization) and is significantly undervalued.
Business description from Yahoo Finance (see here):
Dell Inc. provides integrated technology solutions in the information technology (IT) industry worldwide. The company designs, develops, manufactures, markets, sells, and supports mobility products, including laptops, netbooks, tablets, and smartphones; desktops PCs; and servers and networking products. It also offers storage solutions comprising storage area networks, network-attached storage, direct-attached storage, disk and tape backup systems, and removable disk backup.
8 reasons DELL is underpriced at $15 a share:
- It has an A- rated balance sheet with approximately $4.50 per share in net cash.
- Stripping out net cash, Dell is selling at just over 5 times this year’s projected earnings.
- It is making inroads in selling to emerging markets. BRIC revenues have gone from 9% of total sales to 13% in the last 18 months.
- DELL is selling at the bottom of its five year valuation range based on P/B, P/S, P/E and P/CF.
- Dell looks like it has technical support at the $14 level (see chart below, click to enlarge).
- Analysts consistently have underestimated Dell’s earnings power. It has beat earnings estimates 11 of the last 12 quarters. The average beat over consensus over the last four quarters has been 29%.
- It has a forward PE of just 8, which is an over 35% discount to its five year average.
- The stock price is under analysts’ price targets. S&P has a price target of $19 on DELL and the median analysts’ price target is $18.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in DELL over the next 72 hours.
