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Strategies & Market Trends : Value Investing

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E_K_S

JohnyP

To: E_K_S who wrote (74800)	1/7/2024 12:03:49 PM
From: Sean Collett	2 Recommendations Read Replies (1) of 78482

It is important to note that a high ROE is not a good measure to use when looking at a company with high debt though. So while BARD may give this in DELLs favor, I think it also is not considering the fact that the debt is itself high and then one can assume inflating your figure - especially looking at the equity situation. And while I agree the DFS debt is separate they do have $1B in aging with $868M 1-90 days past due and $136M >90 days. In their April 2022 10-Q they only had $585M in this bucket so that is growing. Meanwhile the total debt here has not really changed much as it was $10.2B in April 2022 and now $10.3B in their recent 10-Q. ROIC would be a potentially better metric to use in this situation given the leverage in both situations (DELL & HPQ). Looking at annual figures: ROIC for DELL is 15.41% vs. HPQ at 45.63%. And if we look at the inverse of the P/E (earnings yield) we see Dell offers a 4.94% vs. HPQ of 10.99%. I don't think the question here is Dell a bad company. It is not (that FCF is very nice). I think the question is what is the intrinsic value of the stock and when can we estimate it may achieve that value? January 7th, 2022 it traded at $57.99/s and today it is at $75.84/, it was just trading at $23.47/s on January 7th, 2019. It is at the highest levels it has traded at in it's history from what I can tell, so is there more room here? Is the server space going to see further growth as the cost of financing has risen so much? Mr. Market is full of surprises, but I would say the margin of safety is not too strong at the current share price. -Sean

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