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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: SirVinny who wrote (105389)	2/26/1999 2:50:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 176387

Vince, I'm a financial analyst, but I don't work for Wall Street, and I don't analyze stocks for a living, so I have a hard time figuring out exactly what those "analysts" do. They seem to have all gone to the same school, because they talk the same talk, and they travel in herds. I didn't take their two week study at home financial analysis course, so I can't explain what these people do or why they do it. Maybe the herding instinct (there's safety in numbers) explains a lot of their behavior. As far as I'm concerned, there is only one basis for valuing a company -- cash flow (both current and future). But real analysis consist of understanding how a company generates it's economic profits. That means examining issues like the causes of exceptionally high ROICs (as in Dell's case), or how efficiently management uses cash assets, etc. But that kind of thing takes independent thought -- not something these "analysts" are good at. Look at Niles, gloating over his great call, and now I ask you how that "call" was possible in view of the apparent channel stuffing by Compaq? Answer: it wasn't possible. Niles was fed the data by Dell to soften the blow to the investment community. So to get back to your initial question, Why do they compare unit sales instead of dollar sales and profit margins? I don't know. My preference is to avoid profit margin analysis (it can be very deceptive) and focus on trends which include gross sales, gross profit, inventory turnover, asset turnover etc.. I like to see a company that increase profits by increasing its top line. And I like to see this accomplished with minimal use of cash. There are lots of ways to probe how these goals are accomplished, but the "analysts" don't seem to have the time or the inclination to do so. TTFN, CTC