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Aggressive Growth

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Dell (DELL) has a solid history of positive earnings surprises and has recently had a breakout. The stock is a Zacks #1 Rank (Strong Buy).

Company Description

Dell Inc. provides integrated technology solutions in the information technology (IT) industry worldwide. The company sells and supports technology products including laptops, netbooks, tablets, smartphones, desktops PCs, servers and networking products. It also offers storage solutions comprising storage area networks, network-attached storage, direct-attached storage, disk and tape backup systems, and removable disk backup. The company was founded in 1984 and is headquartered in Round Rock, Texas.

Earnings Surprises Streak

DELL has strung together a sizeable streak of eight straight positive earnings surprises. There have been some large beats of late, including a 40% and a 43% beat in October 2010 quarter and the January 2011 quarter respectively.

Interestingly, only the January 2011 beat of 43% resulted in a sizeable 10% positive move for the stock following earnings. A 10% beat for the July 2011 quarter resulted in an 8% loss for the stock.

Next Earnings Report

Dell is expected to report earnings after the close on February 21, 2012. The Zacks Consensus Estimate is calling for revenue of $15.995 billion and EPS of $0.51. Wall Street has been particularly sharp with topline estimates for Dell, with the Zacks Consensus Estimate missing the topline by 2% or less in three of the last four earnings reports.

Valuations

Aggressive Growth stock investors will surely remember the name from the explosive growth the stock exhibited in years gone by, but they will be stunned to learn that this stock has such a low valuation. At 8X trailing and forward earnings, DELL trades at a discount to the industry average for both metrics. Price to book and price to sales also show DELL is cheap in comparison to the industry average.

The Chart

A quick look at the price and consensus chart for DELL shows that analysts have been moving expectations higher while the stock remains at depressed levels. Given the number of earnings beats and the relative poor performance for the stock, the recent breakout for DELL could be the start of a longer trend for the stock. DELL is a Zacks #1 Rank (Strong Buy).

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Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service

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