Dell Technologies Inc. (DELL) designs, develops, manufactures, markets, sells, and supports Information technology solutions, products, and services worldwide. The Round Rock, Tex.-based company operates through two segments: Infrastructure Solutions Group and Client Solutions Group. In comparison, Corsair Gaming, Inc.(CRSR) in Fremont, Calif., designs, markets, and distributes gaming and streaming peripherals, components, and systems in the Americas, Europe, the Middle East, and the Asia Pacific. The company offers gamer and creator peripherals.
Despite the supply chain crisis hindering its growth, the computer hardware industry has witnessed significant gains. The demand for computer hardware has increased, with companies rearranging their operations to work remotely. In addition, with the resurgence of omicron-led COVID-19 cases, this need is expected to accelerate further because several companies have delayed their back-to-office plans.
Moreover, amid rapid digital transformation, the use of the internet of things (IoT), artificial intelligence (AI), and cloud-based products and services is expected to rise, driving a growing need for computer hardware. According to Globe Newswire, the global computer hardware market is expected to grow at a 6% CAGR through 2025. Therefore, both DELL and CRSR should benefit. DELL has gained 0.8% in price over the past month compared to CRSR’s negative returns.
But which of these two stocks is a better buy now? Let’s find out.
On December 1,DELL announced that it is bringing Dell’s cyber recovery vault to Amazon Web Services’ AWS Marketplace with the launch of Dell EMC PowerProtect Cyber Recovery for AWS. Through the AWS Marketplace, customers can easily purchase and deploy an air-gapped cyber vault from Dell to help securely protect and isolate data away from a ransomware attack. This could lead to increasing demand for its solution.
On November 2, 2021, Andy Paul, CEO of CRSR, said, “Corsair remains well positioned to capitalize on the underlying secular growth trends around gaming, esports and streaming, and we intend to continue to make investments to enhance our customer experience.”
Recent Financial Results
DELL’s revenues increased 21% year-over-year to $28.39 billion for its fiscal third quarter, ended September 30, 2021. The company’s adjusted EBITDA grew 6% year-over-year to $3.41 billion, while its non-GAAP net income came in at $2.02 billion representing an 18% year-over-year increase. Also, its non-GAAP EPS was $2.37, up 17% year-over-year.
CRSR’s revenues decreased 14.4% year-over-year to $391.10 million for its fiscal third quarter, ended September 30, 2021. The company’s adjusted EBITDA declined 56.6% year-over-year to $27.60 million, while its adjusted net income came in at $16.30 million representing a 66.4% year-over-year decrease. Also, its adjusted EPS came in at $0.16, down 70.4% year-over-year.
Expected Financial Performance
Analysts expect DELL’s revenue to increase 5.2% in the current quarter and 4.9% next quarter. The company’s EPS is expected to grow 3% in the current year. Its EPS is expected to grow at a 5.7% rate per annum over the next five years.
In comparison, CRSR’s revenue is expected to decrease 13.2% in the current quarter and 8.9% next quarter. Its EPS is expected to decline 15.6% in the current year. However, the company’s EPS is expected to grow at a 4.8% rate per annum over the next five years.
DELL’s trailing-12-month revenue is 53.91 times CRSR’s. DELL is also more profitable, with gross profit and net income margins of 30.30% and 6.46%, respectively, compared to CRSR’s 28.07% and 6.12%.
Furthermore, DELL’s 70.02% ROE is higher than CRSR’s 25.78%.
In terms of forward non-GAAP P/E, CRSR is currently trading at 16.66x, which is 157.9% higher than DELL’s 6.46x. Moreover, CRSR’s 11.92x forward EV/EBITDA ratio is 101.3% higher than DELL’s 5.92 x.
So, DELL is relatively affordable here.
DELL has an overall B rating, which equates to a Buy in our proprietary POWR Ratings system. In contrast, CRSR has an overall D rating, which translates to Sell. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
DELL has an A grade for Value, which is consistent with its 0.40x forward P/S, which is 90.3% lower than the 4.13x industry average. However, CRSR has a B grade for Value.
Also, DELL has a C grade for Growth, which is consistent with analysts’ expectations that its EPS and revenue will increase in the coming quarters. In comparison, CRSR has a D grade for Growth, which is in sync with analysts’ expectations that its EPS and revenue will decline in the near term.
Of 51 stocks in the B-rated Technology – Hardware industry, DELL is ranked #22. In comparison, CRSR is ranked #38.
The computer hardware industry is expected to grow exponentially because industry participants help facilitate the new working trends. While both DELL and CRSR are expected to gain, we think it is better to bet on DELL now because of its robust financials, lower valuation, higher profitability, and better growth prospects.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the Technology – Hardware industry here.
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DELL shares were trading at $57.18 per share on Tuesday afternoon, up $0.58 (+1.02%). Year-to-date, DELL has gained 56.04%, versus a 29.41% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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