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Cisco Systems Vs. Dell Technologies which Computer Stock is the Better Buy

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Cisco Systems (CSCO - Free Report) ) and Dell Technologies (DELL - Free Report) ) have been instrumental players in computer technology solutions for many years.

With sentiment continuing to grow toward the broader technology sector, this poses the question of if it’s time to buy either of these historic tech companies.

Brief Overview

Somewhat close competitors, Cisco and Dell both provide a broad range of computer centric solutions.

In this regard, Cisco’s focus is IP-based offering products and services to service providers, companies, commercial users, and individuals. In recent years Cisco has expanded its presence in the network security domain to prevent unauthorized access to system resources and protection from worms, spam, and viruses, among other malware.

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In comparison, Dell also offers security software solutions and systems management along with information management software offerings. However, Dell has still kept part of its focus on hardware offerings such as its iconic desktops and notebooks.

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Recent Performance & Value

Over the last six months, Dell stock has now rallied +26% to top Cisco’s +15%, the Nasdaq’s +14%, and the S&P 500’s +8%. Notably, Dell still stands out from a valuation standpoint with an “A” Zacks Style Scores grade for Value while Cisco lands a “C”.

Trading around $43, Dell shares have an 8.5X forward earnings multiple which is 51% below their five-year high of 17.4X and on par with the median. In comparison, Cisco stock trades at $48 per share and 13.3X forward earnings which is 36% below its own five-year high of 20.8X and a slight discount to the median of 16.4X.

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Growth Estimates

Dell has the overall edge in Growth, also landing an “A” Zacks Style Scores grade while Cisco has a “C” in this category as well.

To that point, Dell’s bottom line figure is much higher even with earnings expected to decline -30% in FY23 at $5.28 per share after a tough-to-compete-against year that saw EPS at $7.61 in 2022. Fiscal 2024 earnings are projected to stabilize and rebound 15% at $6.07 per share. With that being said, earnings estimates have declined over the last quarter for both FY23 and FY24.

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Looking at Cisco, earnings are forecasted to jump 12% this year and rise another 7% in FY24 at $4.04 per share. More intriguing, although Cisco’s bottom line isn't as robust as Dell’s at the moment, earnings estimate revisions have risen 6% over the last 90 days for both FY23 and FY24 respectively.

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Dividends

Stocks that pay dividends are always a bonus for investors, and both companies have solid yields that are above the S&P 500’s 1.53% average.  

Cisco’s 3.10% annual dividend yield has the slight edge over Dell which implemented a dividend for the first time last April.  

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Bottom Line

Cisco stock currently sports a Zacks Rank #2 (Buy) in correlation with rising earnings estimate revisions with Dell landing a Zacks Rank #3 (Hold). Dell’s overall growth and valuation are more intriguing but the declining earnings estimates for both FY23 and FY24 could lead to short-term weakness while Cisco stock could outperform.


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