Introduction

Dell is a transnational corporation that develops, manufactures, sells and supports personal computers and other computer products. It came into success during the 1980s and 1990s and became the largest seller of personal computers and servers. The main difference between Dell and it competitors is that Dell sells its products directly to customers. They do so in order to better understand customers’ needs and provide the most effective computing solutions to meet those needs and this make Dell so unique. Furthermore Dell uses “configure to order” approach which means that they deliver computers configured to special customer specifications. To minimize cost just-in-time approach is implemented. Dell maintains a negative cash conversion cycle(CCC) because it uses a direct-sales model via the internet and the telephone network and receives payments for the products before it has to pay for the materials. Other very important aspect is that Dell uses “pull” system by building computers only after customers place orders and by requesting materials from suppliers as needed and so they avoid overproduction.

Dell’s major competitors are Apple, Hewlett-Packard, Samsung, Sun Microsystems, Gateway, Lenovo, Sony, Acer, Toshiba and Asus.

Dell stocks are trading on the NASDAQ stock market and Dell belongs to Information Technology Industry (Computer Hardware).

Financial statement analysis

Profitability ratios

Comparing Dell’s and industry’s operating margin, Dell’s is relatively larger. That means that Dell earns more per dollar of sales than industry. Same is with the 5 year average. Net profit margin is higher as well during the 2009 and 5 year average. That means that Dell generates more profit for every dollar it generate­s in revenue or sales and of course it is a good signal for the investor as well.

Dell has higher gross profit margin comparing to the industry both in recent year and 5 year average. That means that Dell is financially healthy and has a bigger proportion of money left.

Return on assets is higher as well comparing both recent year and 5 year average, indicating that Dell has an efficient management and that company is able to generate more profit with its assets.

To sum up all indicators shows that Dell performs better comparing to the industry, same in the short-time and in the long-time.

Financial strength

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Dell’s current ratio comparing to the industry ratio is 0.28 less but still company’s current ratio is larger than 1 and that means that company can easily meet short-term debt obligations. So Dell is in relatively good short-term financing standing.

Since we could not find the industry’s total debt to equity ratio we took Apple Company which is Dell’s competitor and belongs to the same industry to compare it to the Dell’s ratio. Dell’s total debt to equity ratio is 5.2 while Apple’s is only 0.95. It’s a huge difference and it is obviously seen that company’s have different management approach. Talking about Dell this kind of total debt to equity ratio can be a little bit frustrating because company with a higher debt/equity ratio may be riskier, especially in times of rising interest rates due to the additional interest that has to be paid out for the debt. But since now interest rates are at all time low, there is not a big issue, of course we need to have in mind that sooner or later interest rates will be changed and it will affect company’s performance if it don’t manage its debts or increase shareholders equity.

We couldn’t find industry’s quick ratio as well, so we used Apple’s ratio to compare with. Apples quick ratio is 1.59 which is considerably higher than Dell’s 1.05. That means that Dell has less ability to use its near cash or quick assets to immediately extinguish its current liabilities

To sum up Dell in financial strength didn’t perform as good as in the profitability. Of course we should take into account that both companies’ are fallowing different strategies and overall Dell’s figures are not bad but should be improved to attract more investors.

Growth rates

Since we couldn’t find industry’s earnings per share average we used Apple’s EPS as the measure to compare with our company. Dell’s EPS is 1.27 while Apple’s 0.69. That indicates that Dell’s stockholders retains more earnings than Apple’s and it’s a good signal for the investor.

Dell has a higher positive beta comparing to the industry. That means that stocks generally follows the market and has higher response to the market change. We think that in this time it’s generally good, because after credit crunch market will eventually stabilize and return to its previous positions.

Dell pays no dividends because company are buying backing its stocks. Generally it’s a good signal for the investors because it’s a signal of confidence. Buy backs also increase demand for stocks driving up prices and by taking shares out of the public’s hands, buybacks make earnings-per-share look better, since there are fewer shares among which to divide profits.

To sum up Dell in growth rates performs well and has all attractive ratios for the investor.

Fundamental analysis shows that Dell performs very well in profitability and growth rates. On the other hand it should increase its financial strength. Overall Dell seems to be good investment. Now we should examine when it’s the right time to buy dell’s stocks both for the short and long times. We will ground it by technical analysis.