Dell Is Trading For 4 Times Earnings

November 13, 2008 at 11:49 am  ·  Category: Fundamental Analysis, Stocks

I just want to give you an example of how absurdly cheap stocks are right now.

Today, on the back of Intel’s reduced forecast and Goldman Sachs putting them on their Conviction Sell list, Dell traded down to $9 a share.

The first thing is that Dell has $3.78 a share in net cash and short term investments on their balance sheet.  That is: Add up their cash and short term investments, subtract their debt, and that’s what they have.  That’s money in the bank.

Subtract that from the share price and you get Dell’s business for $5.22.  Over the last four quarters, Dell earned $1.34.  That’s a trailing P/E of 3.9!  That is sick! – as the kids say.  Even if earnings get cut in half going forward that’s an 8 multiple.  That is absurdly cheap.  The stock is just being given away at this price.

Disclosure: Top Gun is long shares of Dell (DELL).

Posted by Greg Feirman  ·  Trackback URL  ·  Link
 

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