Dell Technologies (NYSE: DELL), the household name in computers and IT infrastructure, has been on a wild market ride.
After hitting lows just under $35 in 2022, the stock surged dramatically to reach more than $175 in mid-2024 before settling at its current price around $100.
But is this price justified by Dell’s actual business performance?
Dell operates through two main segments: Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG). The ISG division sells servers, networking, and storage solutions to enterprises and cloud providers. The CSG segment sells laptops, desktops, and related products to consumers and businesses.
Recently, Dell has hitched its wagon to the AI revolution. In the company’s earnings call for the fourth quarter of fiscal 2025, executives highlighted Dell’s AI server backlog of roughly $9 billion and projected AI server shipments of at least $15 billion for fiscal 2026. The market has responded enthusiastically to this AI growth narrative.
For fiscal 2025, the company reported revenue of $95.6 billion, up 8% from the previous year. Operating income was $6.2 billion (up 15%), with diluted earnings per share of $6.38 (up 39%).
These numbers look solid on the surface… but beneath the AI excitement, Dell’s financials tell a more complex story.
In fact, The Value Meter’s analytical framework reveals serious concerns.
Dell’s enterprise value-to-net asset value (EV/NAV) ratio sits at an abysmal -37.64. This extreme negative value indicates that the company’s debt and liabilities dramatically outweigh its asset base – a stark contrast to the average EV/NAV of -5.43 across the broad market.
(Most companies I evaluate have a positive EV/NAV, so I only compare them with other firms that have a positive EV/NAV. But in this rare case, I’m also including firms with negative EV/NAV to put Dell’s situation in context.)
Even more troubling is Dell’s ability to turn its assets into cash. Over the past year, its free cash flow has averaged -27.8% of its net assets, significantly worse than the -18.8% average for similar companies. This tells us that Dell burns through cash at a much faster rate than its peers, a major red flag for its long-term sustainability.
Despite management’s confident projections about AI growth, these fundamental metrics paint a clear picture of a company whose current stock price has become detached from financial reality.
The Value Meter rates Dell Technologies as “Extremely Overvalued.” Investors should exercise extreme caution before buying at current levels.
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