Dell Inc. (DELL) is currently a Zacks #1 Rank (Strong Buy) thanks to a strong earnings history and rising estimates.
Despite its well known name, the stock remains overlooked and undervalued even has earnings hit 5-year highs.
Company Description
Dell Inc. offered integrated tech solutions for the IT industry. They also make desktop PCs, laptops, tablets and smartphones.
It’s true, there are other companies besides Apple (AAPL) in this industry. Apple is great, but it has led to others, like DELL, getting overlooked and under valued as a result.
Income Soaring
Back on May 17 Dell reported an 80% jump in net income, to $1.1 billion. That works out to EPS of $0.55 per share, which was 12 cents higher than the Zacks Consensus Estimate. Dell has now topped forecasts in 6 consecutive quarters.
Revenues rose a modest 1% to $15 billion. The company’s focus on higher-value products, cost management and other factors led to higher margins.
Estimates Pick Up
Analysts are now expecting full-year earnings for fiscal 2012 to come in at $1.90, up 21 cents over the past 3 months. Next year’s estimates average $1.92, up 16 cents.
In fiscal 2011 Dell earned $1.54 per share, putting growth rates at 23% and 1%, respectively.
Under the Radar
Dell may have a market cap above $30 billion, but due to Apple’s popularity and the company’s struggles in the past its earnings potential is getting overlooked.
Shares of DELL are trading at less than 10 times forward estimates. That puts the PEG at 1.2 times. But the real surprise is the disparity in the EPS growth and the share price growth. Take a look at the 5-year Price vs. Consensus chart below.
EPS estimates have not been this high in 5 years and they are still climbing. Yet, share price remains depressed. I am not saying Dell is better than Apple, but it is definitely worth considering.
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Small Cap Trader service
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