I think the most attractive points that this stock has at this point , short of the potential positive news that Victor just outlined, is its cheap value relative to its expected growth rate. I run these numbers before today's opening and you can see how CPQ is the cheapest in its group, even less expensive than AAPL which just had a good run. What strikes me the most is how cheap it looks compared to its peers. It is amazing:
99 P/E : CPQ 21.4X VS AAPL 16.4X, DELL 59.2X, GTW 25.3X, HWP 22.8X, IBM 28.1X
Price/Book: CPQ 3.6X VS AAPL 3.6X, DELL 56.1X, GTW 8.3X, HWP 4.6X, IBM 10.1X
Price/Growth Rate [00 EPS/99 EPS]: CPQ 0.37X, AAPL 5.6X, DELL 1.7X, GTW 1X, HWP 2.3X, IBM 1.9X
Relative to DELL, CPQ is incredibly inexpensive. I do believe that DELL does deserve a premium given its superior growth rate and increasing market share gains. But I don't think DELL is worth 16 times more (price/ book), 4.7 times more (price/growth) or even 2.8 times more (99 P/E). CPQ's current multiples do reflect an excessive lack of credibility in the company's prospects and long term viability. If you dispute this perception then you should consider buying this stock. |
