Dell makes custom built PCs and Laptop computers for individuals and small and large businesses. They have a reputation of building decent quality laptops aimed at the mid-range price levels. If we look at the fundamentals we learn that Dell is trading at 20 times this year’s earnings, but growth is 23% which means we should be looking toward next year’s earnings as an indication of where to buy and sell this stock.
With 23% growth, this stock should be at just above $30 based on current earnings. We are just below that here with the stock closing at $26.92 which I should add is also just under the 52 week high. Last year, Dell had no debt and a cash flow at the end of the year of 7 billion. They also spent 7 billion buying back stock.
This is good news. When a company has positive cash flow and is aggressively buying back their own stock, it’s a recipe for success.
The other good piece of news is there hasn’t been any inside selling in quite some time. Massive insider selling is always a sign of a problems and one of the early indicators you can use to decide if you should get out of a stock.
Dell’s server market has been faring better than their PC wing, but things are moving along now in the PC market. They are also collaborating on medical advances in hardware and software aided design which is helping them gain market share and diversify.
If you consider that institutional investors are willing to pay twice the growth rate, Dell could be selling at $60 which could very well happen if things keep going the way they have been. I think the upside potential for Dell is huge and with a CEO you can believe in, I think the stock goes to 30 almost immediately and then makes its way to 60 in 18 months.
Keywords: Dell, Laptop computers
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