Dell Technologies Q3 Earnings: Is DELL Cheap at 7.2x Forward P/E?

in EARNINGS/INVESTING IDEAS by

Dell Technologies Inc. (NYSE:DELL) is scheduled to report Q3 earnings results on November 26, 2019, at 4:30 PM CST. You can find more information about the conference call here.

The company is expected to report earnings of $1.56/share on revenue of $23.008 billion. The consensus earnings per share (EPS) of $1.56/share is based on a poll of 16 analysts. The revenue forecast of $23.008 billion based on a poll of 13 analysts implies a year-over-year (YoY) growth of 2.3%. Last year the company reported $22.482 billion in revenue for the quarter.

Expected to report EPS of $1.56/share for Q3, 2019
Metric Expected Prior Year YoY Change
Revenue $23,008.00 $22,482.00 2.3%

Earnings Call Trends

Management has exceeded analyst expectations 2 out of the last 3 tracked quarters, and missed expectations 1 quarter.

Analyst Expected vs Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $1.47 $2.15 45.9% Beat
Q1, 2020 $1.22 $1.45 18.9% Beat
Q4, 2019 $1.86 $1.82 -2.2% Missed

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending August 2, 2019, the stock price reacted by increasing by 13.8%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
2019-08-29 $45.30 $51.53 13.8% Increase
2019-05-30 $66.20 $59.55 -10.0% Decline
2019-02-28 $56.25 $56.65 0.7% Increase

Fundamentals And Technical Analysis

Dell Technologies is currently trading at $55.23/share, up 3.0% for the day. The company is trading at approximately 78% of its 52-week high of $70.55/share. The company’s stock price is up 7.2% since the last earnings report and down -0.6% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 51.92 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.

The current share price implies a price-to-earnings (P/E) multiple of 11.5x and a forward P/E multiple of 7.2x. Dell Technologies’s current share price also implies a price-to-book (P/B) multiple of -15.9x. The following table summarizes some other key fundamental ratios:

Data as of November 25, 2019
Metric Value
Last Fiscal Period FY2020.Q2
Period End Date August 2, 2019
Stock Price (Current) $55.23
P/E Ratio 11.5x
P/E Ratio (Fwd) 7.2x
PEG Ratio 1.9
Total Debt to Capital (%) 54.7%
Levered Free Cash Flow $5.451 billion
Enterprise Value / EBITDA 10.0x

Source: Finbox

Company Profile: Dell Technologies Inc.

Dell Technologies Inc. is a large-cap stock with a market capitalization of $38.848 billion and a total enterprise value of $88.767 billion. The company operates in the Information Technology sector and Technology Hardware, Storage & Peripherals industry.

Dell Technologies Inc. designs, develops, manufactures, markets, sells, and supports information technology (IT) products and services worldwide. It operates through three segments: Infrastructure Solutions Group (ISG), Client Solutions Group (CSG), and VMware.

The ISG segment provides traditional and next-generation storage solutions; and rack, blade, tower, and hyperscale servers. It also offers networking products and services that help its business customers to transform and modernize their infrastructure, mobilize and enrich end-user experiences, and accelerate business applications and processes; and attached software, and peripherals, as well as support and deployment, configuration, and extended warranty services.

The CSG segment offers desktops, notebooks, and workstations; displays and projectors; third-party software and peripherals; and support and deployment, configuration, and extended warranty services. The VMware segment offers compute, cloud management, and networking, as well as secure storage, availability, and other end-user computing offerings that provide a flexible digital foundation to enable the digital transformation. The company also offers a cloud-native platform that makes software development and IT operations a strategic advantage for customers; information security and cybersecurity solutions; cloud software and infrastructure-as-a-service solutions that enable customers to migrate, run, and manage mission-critical applications in cloud-based IT environments; cloud-based integration services; and financial services. It has a collaboration with Microsoft to deliver a joint Internet of Things (IoT) solution, as well as a partnership with ipoque GmbH.

The company was formerly known as Denali Holding Inc. and changed its name to Dell Technologies Inc. in August 2016. Dell Technologies Inc. was founded in 1984 and is headquartered in Round Rock, Texas.

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