Dell Springs Forward

Ah, the rites of spring: baseball, cookouts, vacations, and, in the best of times, positive earnings news. Dell (Nasdaq: DELL  ) kicked the season off right yesterday, reporting that it would beat its first-quarter revenue forecast and buy back more than $1 billion in stock. Investors appear to be downright giddy with the news, sending Dell's shares higher by close to 2% today.

The computer maker said in February that it expected to book $11.2 billion in sales and $0.28 per share in earnings for the first quarter. Now Dell forecasts $11.4 billion in revenue, due primarily to big gains overseas, especially in Europe and China. Executives didn't alter bottom-line guidance.

The revised numbers improve what has already been a great growth story. Indeed, a review of Dell's financial statements shows the firm is accelerating sales growth. First-quarter revenue last year was up 18.2% from the same period during 2002. Sales for this year's first quarter should be up by 19.6% over 2003, marking the fourth consecutive quarter of year-over-year revenue growth. (Sales were up 15.6% from 2002 during last year's second quarter, up 16.2% for the third quarter, and up18.2% for the fourth quarter ended in January.)

No wonder investors are happy. Accelerating growth can be a powerful indicator. It is so important, in fact, that Tom Gardner dedicated an entire section of a past Motley Fool Hidden Gems newsletter to the topic.

After reviewing the data, I'm not surprised that David Gardner chose Dell as his February 2004 pick for Motley Fool Stock Advisor. When asked this morning if the pricey valuation -- Dell trades at 35 times trailing earnings, higher than its long-term growth rate -- has changed his opinion at all, David said absolutely not. Instead, he predicted that Dell's sales would continue to accelerate, due in no small part to its broadened product portfolio and international presence.

Is that just spring optimism speaking? Or is Dell really that good? With apologies to Jeopardy host Alex Trebek, I'll form my answer as a question: Do the shareholders who are still buying Pixar (Nasdaq: PIXR  ) and Electronic Arts (Nasdaq: ERTS  ) at more than 30 times earnings think they've been cheated? Hardly.

Dell, Electronic Arts, and Pixar are all picks David Gardner has made forMotley Fool Stock Advisor, and he's walloping the market as a result. So is his brother. Want a piece of the action? Try Motley Fool Stock Advisor for six months, risk-free.

Fool contributorTim Beyershas no stake in any of the companies mentioned, although he should own Pixar for all the times his kids make him watch Finding Nemo and Toy Story. You can view his Fool profilehere.


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