With shares of Dell Inc. (NASDAQ:DELL) trading at around $10.68, is Dell an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

If you’re a man, then Dell might remind you of a beautiful woman in a bar who looks at you with a spark in her eye, talks to you in a suggestive voice, and even asks you to follow her out the door. However, once you follow her out the door, you end up standing outside looking at an empty sidewalk. A car drives through a nearby puddle and splashes water onto your favorite outfit. What once looked like something with great potential was nothing but a mirage. The amazing thing is that you will walk back into the bar and fall for the same woman again. As long as she is there, you will allow her to lead you on and let you down time and time again.

If you’re familiar with Dell, then you understand. Dell has a habit of making acquisitions that fool investors into believing there will be a light at the end of the tunnel. Some examples over the past few years include Wise Technology, Perot Systems, KACE Networks, Gale Technologies, SonicWall, and Quest Software. Is it possible that these acquisitions will make Dell a shining star again? Yes, but so far, not so good. Dell is attempting to become like International Business Machines Corporation (NYSE:IBM), but it’s not working. Dell needs to understand that investors and humans, and humans like to get excited. Therefore, Dell needs to make an acquisition that will excite investors… give them something to talk about.

 

All of that said, there is a common misconception about Dell these days. Everyone is still hooked on Dell being a PC company. Dell still sells PCs, but it also sells smartphones, tablets, workstations, notebooks, and much more. Dell has also been working its way into the IT business. Actually, IT is now the first thing listed on Dell’s business profile. This is a subtle hint for the future direction of the company. Another positive is that Goldman Sachs (NYSE:GS) recently upgraded Dell to a Buy. Furthermore, 15 of 19 analysts are bullish on the company. As far as the short position goes, it’s 5 percent, but considering the constant negative attention Dell receives, you would expect it to be much higher.

Let’s take a look at some important numbers for Dell. There are some interesting surprises.

E = Equity to Debt Ratio Is Normal

The debt-to-equity ratio for Dell is normal, and the balance sheet is in positive territory.

 

Debt-To-Equity

Cash

Long-Term Debt

DELL

0.89

$11.27 Billion

$9.03 Billion

HPQ

1.25

$11.30 Billion

$21.79 Billion

AAPL

0.00

$29.13 Billion

$0

 

T = Technicals on the Stock Chart Are Mixed

Dell has outperformed Hewlett-Packard (NYSE:HPQ) over the past few years, but it has underperformed Apple (NASDAQ:AAPL). Apple isn’t really a direct competitor anymore. It has left Dell in the dust, which has everything to do with Dell missing the mobile gravy train.

 

1 Month

Year-To-Date

1 Year

3 Year

DELL

11.67%

5.33%

-25.83%

-24.43%

HPQ

16.66%

5.33%

-40.08%

-69.36%

AAPL

-6.21%

3.15%

36.74%

162.80%

 

At $10.68, Dell is currently trading above its 50-day and 100-day SMA, and below its 200-day SMA.   

50-Day SMA

9.82

100-Day SMA

10.27

200-Day SMA

12.15

 

E = Earnings and Revenue Have Been Impressive

Wait! What? Does that say, “Earnings and Revenue Have Been Impressive”? There must be some kind of mistake. This is an article about Dell, right? Yes indeed, this actually pertains to Dell. While everyone has been running for the hills, Dell has quietly been increasing revenue and earnings on an annual basis. At least that has been the case since 2010.

 

2008

2009

2010

2011

2012

Revenue ($)in billions

61.13

61.10

52.90

61.49

62.07

Diluted EPS ($)

1.31

1.25

0.73

1.35

1.88

 

When we look at last quarter on a YoY basis, we see a significant drop in revenue and earnings. When combined with the paragraph and chart above, was that like a sexy woman in a bar getting you excited for no reason?   

 

10/2011

1/2012

4/2012

7/2012

10/2012

Revenue ($)in billions

15.36

16.03

14.42

14.48

13.72

Diluted EPS ($)

0.49

0.42

0.36

0.42

0.27

 

T = Trends Support the Industry

This really depends on what industry we’re talking about. If we’re talking about an industry in which companies had enough foresight to get involved with mobile, then trends support the industry. If we’re referring to the PC industry, then trends don’t support the industry. However, Dell is expanding into other areas.

Conclusion

Dell has a few things going for it. It’s a financially sound company, acquisitions are being made, new avenues are being explored, and there is a 3.20 percent yield. On the other hand, you have to relate companies, or stocks, to people. If you know someone who constantly lets you down, then that person will continue to let you down in the future regardless of how much you hope for something else. Even though you like that person, you need to drop him or her from your life. Dell has let down its investors for years. Another bad sign is that Dell has been removed from the S&P 100 Index. At least someone picked up on the pattern and had the guts to make an important and correct decision.

Dell is far from dead, but sometimes a slow death is the most painful one. Dell is currently a STAY AWAY.

Copyright Wall St Cheat Street All rights reserved.