Novice Investing - Dude, You Better Get A Dell

Date: Tuesday 07th 2008f October 2008 02:01:53 AM

Dude, You Better Get A Dell - 05/03/2006

By: Novice Investing Staff

Should you be getting a Dell stock (DELL)? Or not? In the past, Dell stock has been way too pricey for our taste. Share price has since fallen close to $ 25.00 or market capitalization of around $ 58.44 Billion. That ain't too bad, considering that the company has positive net cash of $ 9 Billion as well as $ 3.02 Billion of long term investments.

For the year ending on January 2007, Dell is expected to earn $ 1.63 per share or $ 3.76 Billion. This is a price tag of 12 times earnings, which is multiples assigned to a company that has stagnant growth. To be fair, the company has been disappointing analysts' estimate for the past year or so. Therefore, even the $ 1.63 per share estimation may not be what Dell will eventually earn but at $ 25 a share, this company is worth a look.

Dell is not without problems. During its lifetime as a public company, Dell Inc. is known to be the provider of mass low cost PC with decent customer service. Customers bought Dell PCs because of their reliability and lower price. They may not be the lowest but Dell has always provide value for the money for its customers.

Meanwhile, larger competitors such as Hewlett Packard and Gateway seemed to be lost in the wood. None of them can consistently make any money selling PC. However, things change for the worse since the beginning of last year. Under the new leadership, HP now 'get' it. Improving its efficiency, on its latest quarter, HP was able to eke out operational profit for its PC division at the expense of Dell. Further, new competitors from China, Lenovo, had been buying IBM's PC business and compete in the same field as Dell for North American business. This will hurt Dell on the low end.

As you may know, Dell prides itself as the low cost provider of PC in North America. With the entrance of Lenovo and the resurgence of HP, Dell might find itself being Jack of All Trade. That explained its struggle for the past year.

Investors might be wary of looking at Dell right now but at $ 25 a share, it might be worth watching for your potential turnaround investment. While, the price seems to be a little bit high, Dell is now trading cheaper than any other period in history. Thus, research this company closely and who knows if it turn out to be your best investment pick.

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Dell Inc. or any other securities.

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