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Technology Stocks : Dell Technologies Inc.

DELL 124.74

-6.8%

11:48 AM EST

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To: Chuzzlewit who wrote (67508)	9/25/1998 2:15:00 PM
From: jhg_in_kc	Read Replies (4) of 176387

Chuzz, Re Dell valuation ... This was posted to me from the Buffett thread. I can't believe he's looking at the same stock we are. What's wrong with his numbers?(I am an English major) jhg Let me give you my take on Dell's valuation. Granted this is a crude approach, but given the possible variations on the inputs, precision is not possible anyway. Assume PC sales presently around $150 billion grow 15% annually for 5 years to about $300 billion. (I think this is generous.) Assume Dell will have a 25% market share in 5 years. (This too is generous in my opinion) Assume Dell's return on this $75 billion in revenue is 6%. (Lower than present, but still high for a retailer) Assume Dell's $4.50 billion in income is divided among 1.6 billion shares (5% growth due to options exercise) This gives Dell an EPS in 5 years of $2.81. Assume an above average market multiple for a company in a moderately growing industry. I estimate 30 is appropriate. Dell's stock price in 5 years = $84/share. This equates to a yearly return of 5.2%. Just about the rate of T-Bills with many times the risk. -Robert

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