Dell Is Priced To Buy

Dell (DELL) looks like a stock you might want to consider buying on this recent market weakness. The stock is 15.11% off its 1 year high, and although analysts predict lackluster numbers for the next year, the stock seems a bargain at this price. The graph provided by Barchart shows the market hasn't been kind to Dell recently:

Dell Inc. provides integrated technology solutions in the information technology industry worldwide. The company designs, develops, manufactures, markets, sells, and supports mobility products, including laptops, netbooks, tablets, and smartphones; desktops PCs; and 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. In addition, the company provides third-party software products consisting of operating systems, business and office applications, anti-virus and related security software, and entertainment software; and peripherals, such as printers, televisions, notebook accessories, mice, keyboards, networking and wireless products, and digital cameras.

In addition, it offers IT and business services, including transactional services, such as support, managed deployment, enterprise installation, and configuration services; outsourcing services comprising data center and systems management, network management, life cycle application development and management, and business process outsourcing services; and project-based services consisting of IT infrastructure, applications, business process, and business consulting services, as well as offers asset recovery, recycling, and applications maintenance services.

Further, the company provides financial services, including originating, collecting, and servicing customer receivables related to the purchase of its products. Dell Inc. sells its products and services through its sales representatives, telephone-based sales, and online at dell.com, as well as through indirect sales channels. It has strategic alliance with ikaSystems Corporation to deliver advanced administration and care management solutions to healthcare payers. The company was founded in 1984 and is headquartered in Round Rock, Texas. (Yahoo Finance profile.)

Factors to Consider

Barchart technical indicators:

• Barchart uses various technical indicators from 7 days to 6 months to analyze the direction and strength of a stock's current price momentum
• Sell signals can indicate a dip in price and a favorable entry point on stock that are at the right price
• 60% Barchart short term sell signal
• Trend Spotter sell signal - getting weaker
• Trading below its 20, 50 and 100 day moving averages
• 15.11% off its 1 year high
• Relative Strength Index 46.25%
• Barchart computes a technical support level at 14.69
• Recently traded at 14.93 with a 50 day moving average of 15.38

Fundamental factors:

• 31 Wall Street brokerage firms have assigned 35 analysts to run the company's numbers
• Analysts project just a .90% increase in sales this year and only another 2.00% increase next year
• Earnings are estimated to increase by 32.70% this year, slightly down by 4.70% next year but average a 4.94% annual increase over the next 5 year
• These consensus numbers resulted in 13 strong buy, 6 buy, 11 hold, 4 under perform and a sell recommendation for their clients
• The company enjoys an A financial strength rating
• My buy point is the 6.81 P/E ratio is a big discount to the 13.80% P/E ratio of the market

General investor interest:

• I use the readers of Motley Fool to gauge individual investor interest in a stock and this is a widely followed issue
• 5,688 readers voted 71% that the stock will beat the market
• The more savvy All Stars also voted 71% for the same result
• Some Wall Street columnists that have favorable reports out are Jim Cramer, Bob Olsteing and Chris Davis

I think it's important to compare a stocks price action over the past year to its competition, and although DELL is up 8%, IBM (IBM) was up 26% and Lenovo (LNVGY.PK) was up 9%:

I am not recommending a buy of Dell on its growth potential, which at this point, by the analysts' call is no better than the overall market. I do, however, think that with their steady revenue and earnings increases, the discounted P/E will come back to a P/E more closely associated with the market averages. Buy on this dip and hold until the P/E recovers.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.