What a time it’s been for Dell. In the past six months alone, the company’s stock price has increased by a massive 160%, reaching $361 per share. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is now still a good time to buy DELL? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free.
Why Is DELL a Good Business?
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 Strong Momentum
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Luckily, Dell’s sales grew at a solid 8.5% compounded annual growth rate over the last five years. Its growth surpassed the average business services company and shows its offerings resonate with customers.
2. EPS Increasing Steadily
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Dell’s solid 9.2% annual EPS growth over the last five years aligns with its revenue performance. This tells us its incremental sales were profitable.
3. New Investments Bear Fruit as ROIC Jumps
We like to invest in businesses with high returns, but the trend in a company’s ROIC can also be an early indicator of future business quality.
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 an elite business services company, and with the recent rally, the stock trades at 20.8× forward P/E (or $361 per share). Is now a good time to buy despite the apparent froth? See for yourself in our full research report, it’s free.
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