00:00:00
typically when we look at the SNP we
00:00:02
have the larger names that pop out the
00:00:04
nvidias the microsofts and the apples
00:00:06
today we want to look at a company that
00:00:08
is under the radar which is Dell
00:00:10
Technologies in fact this as you can see
00:00:13
in the middle down 9% just over the last
00:00:16
week and the reason why we're covering
00:00:18
this company is because Wall Street see
00:00:20
this as a lot of upside by the end of
00:00:23
the year and we also want to take a look
00:00:25
do we agree and is this a company with
00:00:27
some high quality metrics now first
00:00:30
thing you will see they are up 25% over
00:00:32
the last 12 months but in the recent
00:00:34
term they haven't had the best
00:00:36
performance down 2% on Friday over the
00:00:39
last week down 3% over the last month
00:00:41
down 10% over the last 6 months year to
00:00:44
date as well they haven't just
00:00:46
performing as strongly as you want yet
00:00:48
over the last 5 years they have
00:00:50
outperformed the SNP up
00:00:52
112% and right now they are trading
00:00:55
towards the lower end of the 52e range
00:00:57
and quite a significant way away from
00:01:00
their 52- we high at
00:01:02
$180 it's nice to see they also pay a
00:01:04
divin of 1.72% and both Seeking Alpha
00:01:08
and Wall Street currently give this
00:01:09
company the buy rating now one thing
00:01:12
that we should highlight they are
00:01:13
expected to report their earnings on the
00:01:15
25th of February so over the next few
00:01:17
weeks after the market close and if we
00:01:20
just see their latest earnings they did
00:01:22
actually see their share price drop and
00:01:24
that ultimately came on the light
00:01:26
forecast that they guided even though
00:01:28
the market did see artificial
00:01:30
intelligence sales continuing to grow
00:01:33
now how much of a discrepancy was there
00:01:35
well they expected 24 to 25 billion in
00:01:38
the upcoming quarter and as we can see
00:01:40
the market wanted to see marginally
00:01:42
higher and no surprises as we always say
00:01:45
if companies aren't executing at a bare
00:01:47
minimum at the expected level they will
00:01:50
get punished Dell is no different now in
00:01:53
terms of how the quarter went 215 it was
00:01:55
good above the 206 however their revenue
00:01:58
and we say only marginally did come at a
00:02:00
Miss yet their bottom line which is very
00:02:02
important to always analyze was up 12%
00:02:05
from the same quarter last year and
00:02:07
overall Revenue as well up around 10% as
00:02:10
we mentioned though however during this
00:02:12
quarter the main reason for the drop was
00:02:14
down to their guidance which wasn't just
00:02:16
lower on the revenue but also as we can
00:02:18
see they anticipate 250 with the market
00:02:21
wanting to see 265 whether or not though
00:02:24
we will see them actually outform
00:02:25
definitely something to consider as that
00:02:27
can also move them significantly in the
00:02:29
other direction and in terms of looking
00:02:32
at this company one thing we do actually
00:02:34
quite like to note is that over the next
00:02:36
four quarters they are anticipating
00:02:38
double digit growth to the EPS on a
00:02:40
year-on-year comparative and over the
00:02:42
last four quarters they have
00:02:43
outperformed 75% of the time only one
00:02:46
miss which you could argue was marginal
00:02:48
at 2 cents and if we look to January
00:02:51
2026 their EPS estimate of 942 does mean
00:02:55
you are looking at a company valued at
00:02:57
11 now granted this isn't a company that
00:02:59
is incredibly fast growing but 11 does
00:03:02
seem to be fairly cheap especially when
00:03:04
you do look at the sector as a whole 26
00:03:07
meaning right now if you are buying this
00:03:09
company you are getting a near 50%
00:03:11
discount to the overall sector although
00:03:13
we can see they do sit a little bit
00:03:15
above their 5year average again though
00:03:18
if you are someone that likes to look at
00:03:19
other valuation metrics all of them
00:03:21
point to this company Dell Technologies
00:03:23
trading at quite a large discount in
00:03:26
terms of the growth well they do get to
00:03:27
see so there is some argument and some
00:03:29
reasonability as to why it does trade at
00:03:32
a discount 3% over the last 12 months
00:03:34
below the sector of five although above
00:03:36
their 5year average in terms of their
00:03:38
revenue growth forward looking looking
00:03:40
very marginal at 0.55 which is lower
00:03:42
than the sector median as well as their
00:03:44
5year although only a very trivial
00:03:46
amount and one thing we always like to
00:03:48
look at is the EPS we can see over the
00:03:50
next 3 to 5 years 14% expected a little
00:03:53
bit below the sector comparative but
00:03:55
actually quite significantly higher than
00:03:57
what we have seen on a historical basis
00:03:59
from this company and their
00:04:01
profitability does look good at an a
00:04:03
although gross margin 22% below both
00:04:05
comparatives of 50 and 26% their bottom
00:04:09
line though it is coming in again we are
00:04:11
talking very small amounts above both of
00:04:13
them 4.4 versus 4.1 versus 3.8 cash from
00:04:17
operations though does look very
00:04:18
impressive one of the reasons why we do
00:04:20
see the a rating 5.5 billion over the
00:04:23
last 12 months generated above the 94
00:04:25
million of the comparative but it does
00:04:27
come under what we have seen from this
00:04:29
company which has historically been 8.52
00:04:32
billion we do however very quickly just
00:04:34
want to show you they still have been
00:04:35
growing at a very impressive rate over
00:04:38
the last quarter on a year-on-year
00:04:39
comparative Revenue up 10% operating
00:04:42
income up 12% and we can see their
00:04:44
earnings per share up 16% so this
00:04:47
company you may think actually isn't one
00:04:49
that we hear about a lot but they are
00:04:51
still doing some very strong numbers and
00:04:53
the reason why we're bringing it to your
00:04:54
attention today is that it does look
00:04:56
like it is been severely undervalued in
00:04:59
what we do see right now as an
00:05:00
overinflated market in terms of what
00:05:03
they're expecting for the next quarter
00:05:05
as we said the end of this month 10%
00:05:07
growth which is still very strong and in
00:05:09
terms of the earnings per share it's
00:05:10
expected to be around 14% of an increase
00:05:13
again keeping it up on both metrics and
00:05:16
when looking to the foure of FY 26 they
00:05:19
do talk about how they expect multiple
00:05:21
Tailwinds that supports their growth
00:05:22
they're anticipating more robust AI
00:05:24
demand which is something we are seeing
00:05:27
across a lot of companies in this sector
00:05:29
and they also talk about an aged install
00:05:31
B in both PCS and traditional servers
00:05:34
Prime for refresh which they do believe
00:05:36
will continue the momentum we have seen
00:05:39
and just highlighted now what are the
00:05:41
institutions doing we do see 76%
00:05:43
ownership around 4 billion worth of
00:05:45
sales over the last year we see around
00:05:47
50% more buying again same time frame so
00:05:50
not only are they quite bullish but we
00:05:52
also see more buying in the most recent
00:05:54
quarter so they are keeping up that
00:05:56
theme that they do quite like this
00:05:58
company and they have been buying a lot
00:06:00
more than they have been selling in
00:06:01
terms of Insider ownership we can see
00:06:03
here around 47% we do notice around 4
00:06:06
billion worth of sales over the last
00:06:08
year in January alone we see around 100
00:06:10
million worth of sales around 50 million
00:06:13
in Q4 now as always we'll show you for
00:06:15
transparency who these insiders are just
00:06:17
bear in mind not something that we
00:06:19
typically use as we don't believe it to
00:06:21
be a bearish signal so the most recent
00:06:23
one 22nd of January so we only talking
00:06:26
about a week ago or so 725 shares Ned
00:06:30
them around $87,000 but as we can see
00:06:32
there have been a few more in January as
00:06:34
well as December again information is
00:06:36
there if you want to use it for your own
00:06:38
analysis in terms of the company itself
00:06:41
so we did say at the beginning we'll
00:06:42
look at the underlining metrics first
00:06:44
thing to point out dividend safety for
00:06:45
Dell sitting at 70 we'll run through
00:06:47
these two valuation metrics but nice to
00:06:50
see last March they did increase the
00:06:51
dividend double digit rate at 20% now
00:06:55
for those that are interested it was
00:06:56
reaffirmed the dividend safety score
00:06:58
which does mean a Dividend Card is
00:07:00
unlikely and we can see in terms of the
00:07:02
last recession how this company
00:07:04
performed they actually had negative 19%
00:07:06
sales which in comparison to the S&P sat
00:07:09
around -12 also one thing to flag this
00:07:12
isn't a company that has historically
00:07:14
offered a dividend we can see it
00:07:15
restarted in 2023 so this is officially
00:07:18
the second year and hopefully we will
00:07:20
get another increase in March this year
00:07:23
and then we get to the first valuation
00:07:25
now remember we're not looking at this
00:07:26
model in isolation we will run through
00:07:28
our own process but what we notice here
00:07:30
first good thing to see is the blue
00:07:32
tunnel is increasing over time which is
00:07:34
the expected price and we can see the
00:07:36
actual price movement has been trading
00:07:38
at a massive Gap meaning severe
00:07:40
overvaluation but right now it does sit
00:07:43
at the upper end which does indicate
00:07:45
solely on this model around reasonable
00:07:47
valuation SL slight overvaluation we
00:07:50
then move on to the forward P which as
00:07:51
we already discussed earlier on does sit
00:07:53
although marginally above the 5year
00:07:55
average so again the conclusion remains
00:07:57
around reasonable valuation now t Al we
00:07:59
discussed dividend yield Theory which
00:08:01
tells us a companies undervalued when
00:08:03
the current yield sits above but as we
00:08:05
said they have only recently
00:08:06
reintroduced the dividend so not one
00:08:08
that we do believe to be relevant today
00:08:11
and as we already highlighted the sector
00:08:12
as a whole does trade much higher
00:08:15
therefore meaning this company is
00:08:16
trading at a discount free cash PayPal
00:08:19
we will just highlight it as we have the
00:08:20
information here but again they've only
00:08:22
recently reintroduce the dividend over
00:08:24
the next 12 months they expect this at
00:08:26
30% so we do anticipate a nice double
00:08:29
increase to the dividend in March 25
00:08:32
terms of free cash flow we do want to
00:08:33
see consistent growth over the long term
00:08:36
not something we get with a company and
00:08:38
in fact we should say on a trading 12
00:08:40
month it is sitting at $4 over the next
00:08:42
12 months expected to grow by around 50%
00:08:45
but we will reanalyze when we get their
00:08:47
full accounting report in terms of sales
00:08:49
growth it is very inconsistent at a bare
00:08:52
minimum we want to see three to 4% just
00:08:54
to keep up in line with inflation but
00:08:56
actually we can see over the last 10
00:08:58
years they've had four of them being
00:08:59
being negative notably 2024 and on a
00:09:02
trading 12 month we do see 3% growth and
00:09:05
we get to see here total sales which we
00:09:06
will cover very soon but in terms of
00:09:08
shares outstanding they have diluted
00:09:10
your position if you were a shareholder
00:09:12
in 2015 but we can also note from 20202
00:09:15
they have started to do share BuyBacks
00:09:17
essentially returning excess cash to
00:09:20
your pockets Roy we love the fact that
00:09:22
it is increasing over the last few years
00:09:25
although again notably it has been at a
00:09:27
negative so perhaps something to keep an
00:09:28
eye on 20 6% on a trading 12 month we do
00:09:31
love to see this remember gives us Faith
00:09:33
management are able to effectively
00:09:34
allocate their Capital operating margin
00:09:37
we want to see two things firstly above
00:09:39
12% something we don't get the second
00:09:41
thing we want to see efficiencies with
00:09:43
margins increasing now we get that from
00:09:45
around 2019 7% on a trading 12 month
00:09:48
what we would say here though is we did
00:09:50
just recently look at the margins gross
00:09:52
margin net margin and they weren't too
00:09:54
bad so no real worries especially when
00:09:56
we compared it to the sector medium in
00:09:58
terms of the free cash flow margin above
00:10:00
5% more often than not now sitting at 3%
00:10:03
on a trading 12 month and then we get to
00:10:05
a very important metric the net debt to
00:10:07
ebit are below three is what we want to
00:10:10
see numbers you see below number of
00:10:11
years it would take the company to pay
00:10:13
off all of their debt net of cash on
00:10:15
hand remember correlates to balance
00:10:17
sheet strength dividend safety 1.26 on a
00:10:20
trading 12 month so no real worries
00:10:22
expected to go lower over the next 12
00:10:24
months as well so what we can in fact
00:10:25
see here is it does look to be very
00:10:27
healthy and we will reconfirm this when
00:10:29
we look at the balance sheet we do want
00:10:31
to highlight the performance against
00:10:32
others in this industry we have HB Inc
00:10:34
hulet packet as well as some many
00:10:36
well-known other comparatives and when
00:10:38
we do look at including dividends
00:10:40
reinvested Del is up around 27% over the
00:10:43
last year in the mid performance as we
00:10:45
can see against these other companies
00:10:47
over the last 3 years we do in fact see
00:10:49
96% the best performing and Over The
00:10:52
Last 5 Years very strong up
00:10:54
351 but as always bear in mind that the
00:10:57
past performance is not an indicator of
00:10:59
the future doing a very similar
00:11:01
comparative well actually over the last
00:11:03
year it has although only marginally
00:11:05
outperformed the S&P when we do it again
00:11:07
over the last three we actually see
00:11:09
massive outperformance and over the last
00:11:11
five again the same conclusion Dell has
00:11:14
historically maybe surprisingly as it is
00:11:16
one under the radar performed very very
00:11:19
strongly but again remember this is
00:11:21
information on a historical basis now we
00:11:23
will show you the income statement and
00:11:25
balance sheet because we have two
00:11:26
considerations to make the first one
00:11:28
whilst Revenue over the longer term has
00:11:30
been increasing now sitting at 88
00:11:32
billion from the latest accounts we
00:11:34
always want to show you what does the
00:11:36
bottom line net income tell us is it
00:11:38
something that follows the Top Line
00:11:40
actually Fe the answer is no very very
00:11:42
inconsistent they actually made a loss
00:11:44
from 2015 to 2019 now they have made a
00:11:47
profit from 2020 onwards but we can see
00:11:50
a lot of inconsistency it hasn't been
00:11:52
growing like we have seen with the
00:11:53
Topline Revenue definitely
00:11:55
considerations just to have now we said
00:11:57
we want to do a quick heal check to
00:11:59
total cash versus total debt which as we
00:12:01
can see very inconsistent over the last
00:12:03
10 years in fact actually minimal
00:12:05
movement when we look at it from a 10e
00:12:07
standpoint 5.4 billion 2015 5.3 billion
00:12:11
in the latest quarter and then as always
00:12:13
we compare it to total debt numerically
00:12:15
and directionally one number in the
00:12:17
balance sheet will never tell you
00:12:18
anything and we can see total depth
00:12:20
again inconsistent but has increased
00:12:23
over the last 10 14 billion in 2015 now
00:12:26
sitting at 26 billion so it is actually
00:12:28
far Superior to their cash balance but
00:12:31
as we saw on the net debt ebit Dar
00:12:33
sitting around the one point no real
00:12:35
worries for the time being now before we
00:12:37
jump in we do want to let you know we
00:12:39
have released our latest fre weekly
00:12:40
article we drop one every single Monday
00:12:43
morning where we cover severely
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undervalued stocks as well as what's
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going in the market over the last few
00:12:48
days so click below you can sign up read
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straight away where you'll be able to
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gain access to a copy released yesterday
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of 45 undervalued stocks for the month
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of February lots of information for each
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one the upside that W Street themselves
00:13:01
see over the next year and you can grab
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another recently release copy of 43
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stocks that W Street themselves believe
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now so click below you can sign up and
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read straight away jumping into our
00:13:14
intrinsic value we arrive at just under
00:13:17
$140 now it's the average of these four
00:13:19
models which we can very briefly show
00:13:21
you how we got to the value we have Dell
00:13:23
the stock ticker symbol with graem's
00:13:25
valuation in fact we have the long-term
00:13:27
growth rate AAA corporate bond yield
00:13:29
with the market value our intrinsic
00:13:31
price at 135 does show us undervaluation
00:13:34
bear in mind we're not looking at any of
00:13:36
these models in isolation then the
00:13:38
multiples companies in a similar sector
00:13:39
and size their average P the EPS of Dell
00:13:42
giving us an intrinsic value actually
00:13:44
slightly lower that is an overvaluation
00:13:47
signal so one for one at the moment and
00:13:49
then the dividend discount model now
00:13:51
nice increases over the last year 16%
00:13:54
however we want to be a lot more
00:13:55
conservative they've only recently
00:13:57
reintroduced the dividend but even with
00:13:59
that we do get a very healthy
00:14:01
undervaluation signal we then move on to
00:14:03
the DCF model with the free cash flow
00:14:05
year on-ear average growth has been very
00:14:07
high although again we want to be very
00:14:08
conservative and with a discount rate we
00:14:10
do get that intrinsic value showing
00:14:12
undervaluation quite severely which as
00:14:14
we said the intrinsic value today is
00:14:16
purely the average of these four models
00:14:18
$140 we don't stop there given the
00:14:20
current price we always like to add a
00:14:22
margin of safety and we start off with a
00:14:24
10% MOS execute on this if it meets the
00:14:27
three criteria wide mode strong
00:14:29
financial metrics good forward-looking
00:14:31
data if you believe that today a buy at
00:14:33
125 and then we keep going till it's
00:14:35
near the current trading price now not
00:14:37
at the 30% level just yet not far off
00:14:40
but we see at least 25% up to $15 with
00:14:43
Wall Street as we said very bullish at
00:14:45
the beginning of the episode they see
00:14:47
this at $150 by the end of 2025 that
00:14:50
translates to 46% upside but as always
00:14:53
give us your thoughts below 25% MOS 46%
00:14:57
upside is this one you're looking to buy
00:14:59
buy hold or sell don't forget to sign up
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00:15:02
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00:15:08
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some purchases and in fact sold just
00:15:12
last week as always have a great day
00:15:14
we'll see you all on the next one
