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Should You Buy Dell Technologies Inc. (DVMT) or Expedia Group, Inc. (EXPE)?

Dell Technologies Inc. (NYSE:DVMT) shares are up more than 16.76% this year and recently decreased -0.23% or -$0.22 to settle at $94.90. Expedia Group, Inc. (NASDAQ:EXPE), on the other hand, is up 5.99% year to date as of 07/13/2018. It currently trades at $126.95 and has returned 0.75% during the past week.

Dell Technologies Inc. (NYSE:DVMT) and Expedia Group, Inc. (NASDAQ:EXPE) are the two most active stocks in the Diversified Computer Systems industry based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.

Growth

Companies that can increase earnings at a high compound rate over time are attractive to investors. Analysts expect DVMT to grow earnings at a 15.50% annual rate over the next 5 years. Comparatively, EXPE is expected to grow at a 15.46% annual rate. All else equal, DVMT’s higher growth rate would imply a greater potential for capital appreciation.

Profitability and Returns

Growth doesn’t mean much if it comes at the cost of weak profitability. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return. , compared to an EBITDA margin of 14.35% for Expedia Group, Inc. (EXPE). DVMT’s ROI is -2.80% while EXPE has a ROI of 6.40%. The interpretation is that EXPE’s business generates a higher return on investment than DVMT’s.

Cash Flow



Cash is king when it comes to investing. On a percent-of-sales basis, DVMT’s free cash flow was 1.13% while EXPE converted 0% of its revenues into cash flow. This means that, for a given level of sales, DVMT is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Liquidity and leverage ratios provide insight into the financial health of a company, and allow investors to determine the likelihood that the company will be able to continue operating as a going concern. DVMT has a current ratio of 0.90 compared to 0.70 for EXPE. This means that DVMT can more easily cover its most immediate liabilities over the next twelve months. DVMT’s debt-to-equity ratio is 4.95 versus a D/E of 1.02 for EXPE. DVMT is therefore the more solvent of the two companies, and has lower financial risk.

Valuation

DVMT trades at a forward P/E of 13.67, a P/B of 6.94, and a P/S of 0.23, compared to a forward P/E of 21.10, a P/B of 4.59, and a P/S of 1.81 for EXPE. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.

Analyst Price Targets and Opinions

When investing it’s crucial to distinguish between price and value. As Warren Buffet said, “price is what you pay, value is what you get”. DVMT is currently priced at a -9.33% to its one-year price target of 104.67. Comparatively, EXPE is -7.04% relative to its price target of 136.57. This suggests that DVMT is the better investment over the next year.

Insider Activity and Investor Sentiment

Short interest, or the percentage of a stock’s tradable shares currently being shorted, is another metric investors use to get a pulse on sentiment. DVMT has a short ratio of 2.77 compared to a short interest of 6.07 for EXPE. This implies that the market is currently less bearish on the outlook for DVMT.

Summary




Dell Technologies Inc. (NYSE:DVMT) beats Expedia Group, Inc. (NASDAQ:EXPE) on a total of 10 of the 14 factors compared between the two stocks. DVMT is growing fastly, has higher cash flow per share, has a higher cash conversion rate and higher liquidity. In terms of valuation, DVMT is the cheaper of the two stocks on an earnings and sales basis, DVMT is more undervalued relative to its price target. Finally, DVMT has better sentiment signals based on short interest.

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