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Bull of the Day: Dell Technologies

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Dell Technologies DELL is a provider of information technology solutions. The company’s operating segments include Client Solutions, Enterprise Solutions Group, and Dell Software Group.

Segment Breakdown

The company’s Client Solutions segment includes sales to commercial and consumer customers of desktops, thin client products, notebooks, and third-party software and peripherals of Client Solutions Hardware.

Dell’s Enterprise Solutions Group includes servers, networking, storage, services, third-party software, and peripherals of ESG hardware.

The Dell Software Group segment includes systems management, security software solutions, and information management software offerings.

Share Performance

Shares have held up relatively well year-to-date, declining approximately 15% and outperforming the general market by a small margin.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Over the last year, the picture remains the same – DELL shares have marginally outperformed the S&P 500.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

The company’s share performance is inspiring – many companies have witnessed deep double-digit valuation slashes throughout 2022. Additionally, the share performance tells us that shares have provided investors with a valuable blend of defense.

Quarterly Performance & Valuation

Dell has consistently reported strong quarterly results, exceeding bottom-line estimates in eight of its last ten quarters. Over the last four quarters, the information technology solutions provider has beat on the bottom line by 8% on average, and in its latest quarterly report, DELL crushed bottom-line estimates by a sizable 33%.

The company sports an enticingly low 8.2X forward earnings multiple, nowhere near 2018 highs of 17.5X and nicely below the five-year median of 10.0X. Furthermore, the value represents a deep 53% discount relative to the S&P 500’s forward P/E ratio of 17.4X.

DELL sports a Style Score of an A for Value.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Forecasted Growth

Analysts have been positively revising their quarterly estimates over the last 60 days, undoubtedly a major positive and a reason the company sports the highly-coveted Zacks Rank #1 (Strong Buy). For the current fiscal year, the Consensus Estimate Trend has increased by a notable 6%, reflecting full-year earnings of $7.04 per share – a sizable 14% year-over-year increase.

Additionally, looking forward, the $7.62 EPS estimate for the next fiscal year has DELL increasing its earnings by a respectable 8.2% year-over-year.

Looking at sales, the $107 billion revenue estimate for FY23 displays a marginal 0.3% expansion in the top line, and in FY24, the $108 billion estimate reflects an additional 1.5% growth in revenue.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Dividends

Dell Technologies rewards its shareholders via its 2.7% annual dividend yield with a sustainable payout ratio of 17% of earnings. The annual yield is much higher than the S&P 500’s yield of 1.5%, and the company has increased its dividend once over the past five years.

Dividends are a significant boost to any portfolio, providing a stream of income that can alleviate drawdowns within a portfolio.

Bottom Line

One of the best ways investors can find expected winners within the market is by utilizing the Zacks Rank – one of the most potent market tools out there. A portfolio consisting of Zacks Rank #1 (Strong Buy) stocks has beaten the market in 26 of the last 31 years with an average annual return of 25%.

Additionally, the top 5% of all stocks receive the highly coveted Zacks Rank #1 (Strong Buy). These stocks should outperform the market more than any other rank.

Dell Technologies would be an excellent bet for investors looking to add a solid stock to their portfolios, as displayed by its Zack Rank #1 (Strong Buy).


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