Long-established in the Hardware industry, Dell Technologies Inc (DELL, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 1.02%, juxtaposed with a three-month change of -17.23%. However, fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Dell Technologies Inc.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 5/10
- Profitability rank: 5/10
- Growth rank: 6/10
- GF Value rank: 1/10
- Momentum rank: 10/10
Based on the above method, GuruFocus assigned Dell Technologies Inc the GF Score of 68 out of 100, which signals poor future outperformance potential.
Understanding Dell Technologies Inc Business
Dell Technologies is a broad information technology vendor, primarily supplying hardware to enterprises. It is focused on premium and commercial personal computers and enterprise on-premises data center hardware. It holds top-three market shares in its core markets of personal computers, peripheral displays, mainstream servers, and external storage. Dell has a robust ecosystem of component and assembly partners, and also relies heavily on channel partners to fulfill its sales. With a market cap of $84.46 billion and sales of $91.84 billion, Dell's operating margin stands at 5.71%.
Financial Strength Breakdown
Dell Technologies Inc's financial strength indicators present some concerning insights about the company's balance sheet health. The interest coverage ratio of 3.51 positions it worse than 76.73% of 1590 companies in the Hardware industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. The esteemed investor Benjamin Graham typically favored companies with an interest coverage ratio of at least five. Additionally, the company's Altman Z-Score is just 1.65, which is below the distress zone of 1.81, suggesting potential financial distress over the next few years. The low cash-to-debt ratio at 0.19 indicates a struggle in handling existing debt levels.
Profitability Breakdown
Dell Technologies Inc's low Profitability rank can also raise warning signals. Additionally, Dell Technologies Inc's Gross Margin has also declined over the past five years, as evidenced by the data: 2020: 24.33; 2021: 23.24; 2022: 21.63; 2023: 22.18; 2024: 23.60. This trend underscores the company's struggles to convert its revenue into profits.
Next Steps
Considering the company's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. Value investors should be cautious and consider these factors when evaluating the potential for future returns. For those looking to explore more robust investment opportunities, GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
