Dell Technologies Inc. (DELL) and Logitech International S.A. (LOGI) are two popular players in the computer hardware industry. DELL’s products include desktop personal computers, notebooks and tablets, and peripherals, such as monitors, printers and projectors. It operates through two segments: its Infrastructure Solutions Group, and its Client Solutions Group. Headquartered in Lausanne, Switzerland, LOGI is known for offerings such as a wireless mouse and corded and cordless keyboards. It also offers a range of gaming gear, such as headsets, gamepads and steering wheels.
While the broader technology industry has been witnessing a slump lately, with investors shifting focus to cyclical stocks amid the economic recovery and avoiding expensive tech stocks on concerns over rising inflation, the rising demand for technology products and services should help the industry recover quickly. The demand for computer hardware is expected to increase in the coming quarters. That’s because the increasing use of advanced technologies, such as the internet of things (IoT) and artificial intelligence (AI), will require advanced computer hardware. According to the Business Research Company, the global hardware market is expected to grow at a 6% CAGR over the next four years. So, we think both DELL and LOGI should benefit from the industry tailwinds.
While LOGI has gained 115.1% over the past year, DELL has returned 108.3%. However, in terms of year-to-date performance, DELL is a clear winner with 40.3% returns versus LOGI’s 31.3%. But which of these two stocks is a better pick now? Let’s find out.
LOGI launched Logitech Scribe on May 18, 2021. It is an AI-powered whiteboard camera. The product is compatible with leading services, such as Microsoft Teams and Zoom, which enables it to broadcast whiteboard content into video meetings with great clarity. Now that hybrid work and learning has become widespread, the demand for this application could well increase in the near-term.
Meanwhile, on May 5, 2021, DELL announced that it had expanded its collaboration with Equinix Inc. (REIT) (EQIX) to broaden the availability of its technologies to APEX Equinix International Business Exchange data centers. The move might help organizations meet unpredictable IT and storage requirements more efficiently when subscribing to APEX Data Storage Services at an Equinix location.
Recent Financial Results
LOGI’s revenue has increased 116.6% year-over-year to $1.60 billion for its fiscal fourth quarter, ended March 31. The company’s operating loss came in at $135.10 million, representing an 85.1% year-over-year decline. Its net loss was $225.80 million, down 5.5% from the year-ago period. Its loss per share was $1.34, down 4.7% year-over-year.
For its fiscal first quarter, ended April 30, 2021, DELL’s sales were $24.50 billion, which represents an 11.8% increase from the prior-year quarter. The company’s net profit for the quarter was $1.82 billion, up 59.1% year-over-year. Its EPS was $2.13, up 59% year-over-year.
Past and Expected Financial Performance
LOGI’s revenue and EBITDA increased at CAGRs of 27% and 63.2%, respectively, over the past three years. Its revenue is expected to decline 0.5% in 2022 and increase 6.9% in 2023. Its EPS is expected to increase 35.9% for the current quarter, ending June 30, 2021, and 10.5% in 2023. Also, LOGI’s EPS is expected to grow at a 30% rate per annum over the next five years.
In comparison, DELL’s revenue and EBITDA increased at CAGRs of 5.5% and 13.1%, respectively, over the past three years. Analysts expect DELL’s revenue to increase 6.7% in 2022 and 0.8% in 2023. Its EPS is expected to grow 4.7% for the current quarter, ending July 31,and 4.1% in 2023. Also, its EPS is expected to grow at a 6.1% rate per annum over the next five years.
DELL’s $96.81 billion trailing-12-month revenue compares to LOGI’s $5.25 billion. However, LOGI is more profitable, with a 44.72% gross profit margin versus DELL’s 31.22%.
Again, DELL’s 72.06% ROE compares favorably to LOGI’s 50.51%.
In terms of forward EV/S, LOGI is currently trading at 3.70x, which is 70% higher than DELL’s 1.11x. And in terms of forward EV/EBITDA, LOGI’s 22.11x is 61.3% higher than DELL’s 8.56x.
So, DELL is the more affordable stock.
DELL has an overall B rating, which equates to a Buy in our proprietary POWR Ratings system. However, LOGI has an overall C rating, which represents Neutral. The POWR Ratings are calculated by considering 118 different factors, with the weighting of each optimized to improve overall performance.
DELL has a B grade for Momentum, which is in sync with its 45.9% returns over the past six months and 23.8% gains over the past three months. LOGI’s 44.6% gains over the past six months and 18.7% returns over the past three months helped it earn a grade of B for Momentum also.
However, LOGI has a C grade for Value. This is justified given its 29.08x forward non-GAAP P/E is 12% higher than the 25.97x industry average. DELL, in contrast, has a B grade for Value, which is consistent with its 12.05x forward non-GAAP P/E, which is 53.6% lower than the 25.97x industry average.
Moreover, DELL has a B grade for Sentiment, in sync with favorable analyst sentiment while LOGI has a grade of C for Sentiment.
Of the 47 stocks in the Technology-Hardware industry, DELL is ranked #7 and LOGI is ranked #27.
In addition to the POWR Ratings grades we.ve just highlighted, we’ve rated both DELL and LOGI for Growth, Stability and Quality. Click here to see the additional ratings for LOGI. Also, get all of DELL’s ratings here.
The demand for computer hardware is expected to grow in the upcoming months. While both DELL and LOGI are expected to benefit from the industry’s growth in the long run, DELL seems to be a better buy now based on its relatively lower valuation and strategic alliances.
Our research shows that the odds of success increase if on bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to learn about top-rated stocks in the Technology-Hardware industry.
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DELL shares were trading at $101.17 per share on Wednesday afternoon, down $1.68 (-1.63%). Year-to-date, DELL has gained 38.04%, versus a 12.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand. More...
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