Dell Technologies Inc. (NYSE:DELL) Shares Could Be 35% Below Their Intrinsic Value Estimate

Simply Wall St.12-11

Key Insights Using the 2 Stage Free Cash Flow to Equity, Dell Technologies fair value estimate is US$179 Dell Technologies' US$117 share price signals that it might be 35% undervalued Our fair ...

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(NYSE:DELL) Shares Could Be 35% Below Their Intrinsic Value Estimate","media":"Simply Wall St.","content":"<div>\n<p>Key Insights\n\n Using the 2 Stage Free Cash Flow to Equity, Dell Technologies fair value estimate is US$179 \n Dell Technologies' US$117 share price signals that it might be 35% undervalued \n Our fair ...</p>\n\n<a href=\"https://finance.yahoo.com/news/dell-technologies-inc-nyse-dell-110013824.html\">Source Link</a>\n\n</div>\n","source":"yahoofinance","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Dell Technologies Inc. (NYSE:DELL) Shares Could Be 35% Below Their Intrinsic Value Estimate</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nDell Technologies Inc. (NYSE:DELL) Shares Could Be 35% Below Their Intrinsic Value Estimate\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-12-11 19:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://finance.yahoo.com/news/dell-technologies-inc-nyse-dell-110013824.html><strong>Simply Wall St.</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Key Insights\n\n Using the 2 Stage Free Cash Flow to Equity, Dell Technologies fair value estimate is US$179 \n Dell Technologies' US$117 share price signals that it might be 35% undervalued \n Our fair ...</p>\n\n<a href=\"https://finance.yahoo.com/news/dell-technologies-inc-nyse-dell-110013824.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4170","symbol_name":"电脑硬件、储存设备及电脑周边","start_time":0,"source_url":"https://finance.yahoo.com/news/dell-technologies-inc-nyse-dell-110013824.html","article_id":"2490858213","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/DHq886Ag4G1rS9TKIvWzQQ--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/4ede54afa2108a12bdee07c0b0d94a59"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2490858213","pubTimestamp":1733914813,"columns":[],"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"Using the 2 Stage Free Cash Flow to Equity, Dell Technologies fair value estimate is US$179. Dell Technologies' US$117 share price signals that it might be 35% undervalued. Our fair value estimate is 18% higher than Dell Technologies' analyst price target of US$151. How far off is Dell Technologies Inc.  from its intrinsic value?Using the most recent financial data, we'll take a look at whether the stock is fairly priced by taking the forecast future cash flows of the company and discounting them back to today's value. We will use the Discounted Cash Flow  model on this occasion. There's really not all that much to it, even though it might appear quite complex.We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model.","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4170":"电脑硬件、储存设备及电脑周边","FCF":"第一联邦金融","TV":"墨西哥电视","LU0267386448.USD":"FIDELITY FIRST ALL COUNTRY WORLD \"A\" (USD) INC","BK4585":"ETF&股票定投概念","DELL":"戴尔","BK4588":"碎股","DCF":"Dreyfus Alcentra Global Credit Income 2024 Target Term Fund, Inc","BK4100":"有线和卫星","BK4211":"区域性银行","BK4515":"5G概念","NYSE":"纽交所","BK4535":"淡马锡持仓"},"translate_title":"戴尔科技公司（纽约证券交易所股票代码：DELL）股价可能比其内在价值预期低35%","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"DCF":1,"DELL":1,"FCF":1,"NYSE":1,"TV":1},"content_text":"Key Insights\n\n Using the 2 Stage Free Cash Flow to Equity, Dell Technologies fair value estimate is US$179 \n Dell Technologies' US$117 share price signals that it might be 35% undervalued \n Our fair value estimate is 18% higher than Dell Technologies' analyst price target of US$151 \n\n How far off is Dell Technologies Inc. (NYSE:DELL) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by taking the forecast future cash flows of the company and discounting them back to today's value. We will use the Discounted Cash Flow (DCF) model on this occasion. There's really not all that much to it, even though it might appear quite complex. \n We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model. \n See our latest analysis for Dell Technologies \n The Method \n We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. \n Generally we assume that a dollar today is more valuable than a dollar in the future, and so the sum of these future cash flows is then discounted to today's value: \n 10-year free cash flow (FCF) forecast \n\n\n\n\n2025\n2026\n2027\n2028\n2029\n2030\n2031\n2032\n2033\n2034\n\n\n Levered FCF ($, Millions) \nUS$4.35b\nUS$6.15b\nUS$6.42b\nUS$7.82b\nUS$7.91b\nUS$8.04b\nUS$8.19b\nUS$8.36b\nUS$8.54b\nUS$8.75b\n\n\nGrowth Rate Estimate Source\nAnalyst x8\nAnalyst x8\nAnalyst x7\nAnalyst x1\nAnalyst x1\nEst @ 1.54%\nEst @ 1.86%\nEst @ 2.09%\nEst @ 2.25%\nEst @ 2.36%\n\n\n Present Value ($, Millions) Discounted @ 8.0% \nUS$4.0k\nUS$5.3k\nUS$5.1k\nUS$5.7k\nUS$5.4k\nUS$5.1k\nUS$4.8k\nUS$4.5k\nUS$4.3k\nUS$4.0k\n\n\n\n(\"Est\" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$48b\n The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.6%. We discount the terminal cash flows to today's value at a cost of equity of 8.0%. \nTerminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = US$8.7b× (1 + 2.6%) ÷ (8.0%– 2.6%) = US$166b\nPresent Value of Terminal Value (PVTV)= TV / (1 + r)10= US$166b÷ ( 1 + 8.0%)10= US$77b\n The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$125b. The last step is to then divide the equity value by the number of shares outstanding. Compared to the current share price of US$117, the company appears quite undervalued at a 35% discount to where the stock price trades currently. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind. \n\n\n\n  NYSE:DELL Discounted Cash Flow December 11th 2024\n \n\n Important Assumptions \n We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Dell Technologies as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 8.0%, which is based on a levered beta of 1.310. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. \nSWOT Analysis for Dell Technologies\n\n\nStrength\n\nEarnings growth over the past year exceeded its 5-year average.\n\n\nDebt is well covered by earnings and cashflows.\n\n\nDividends are covered by earnings and cash flows.\n\n\nDividend information for DELL.\n\n\n\nWeakness\n\nEarnings growth over the past year underperformed the Tech industry.\n\n\nDividend is low compared to the top 25% of dividend payers in the Tech market.\n\n\n\nOpportunity\n\nAnnual earnings are forecast to grow for the next 3 years.\n\n\nGood value based on P/E ratio and estimated fair value.\n\n\n\nThreat\n\nTotal liabilities exceed total assets, which raises the risk of financial distress.\n\n\n Annual earnings are forecast to grow slower than the American market.\n\n\nIs DELL well equipped to handle threats?\n\n\n\n Next Steps: \n Although the valuation of a company is important, it is only one of many factors that you need to assess for a company. It's not possible to obtain a foolproof valuation with a DCF model. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. Can we work out why the company is trading at a discount to intrinsic value? For Dell Technologies, we've put together three pertinent aspects you should look at: \n\n Risks: For instance, we've identified   3 warning signs for Dell Technologies  that you should be aware of. \n Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for DELL's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors. \n Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! \n\n PS. Simply Wall St updates its DCF calculation for every American stock every day, so if you want to find the intrinsic value of any other stock just search here.\nHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2490858213"}