Better Buy: Hewlett-Packard or Dell? (DELL, HPQ)

Better Buy: Hewlett-Packard or Dell?

By Motley Fool Staff | More Articles
December 9, 2009 | Comments (8)

In a new Motley Fool series, we pit two stocks against each other on five criteria to determine the better buy.

Today's matchup is Hewlett-Packard (NYSE: HPQ ) vs. Dell (Nasdaq: DELL ) . Using five short-of-scientific-but-carefully chosen criteria, let's determine which is the better buy according to the numbers:

	Factor	Hewlett-Packard	Dell
Cheapness	(P/E ratio)	15.7	17.7
Growth	(5-year growth rate)	25.5%	-5.9%
Operations	(net margin %)	6.69%	2.82%
Balance Sheet	(debt/equity ratio)	.41	.75
CAPS Rating	(scale of 1 to 5 stars)

Round 1: Cheapness

Advantage: Hewlett-Packard. Cheapness is determined by P/E ratio. The lower the better. Be careful of earnings near zero that skew the ratio, one-time gains and losses, and pasts that aren’t indicative of futures (the more dynamic the industry, the more this is true).

Round 2: Growth

Advantage: Hewlett-Packard. Growth here is the trailing 5-year EPS growth rate. This trailing earnings growth helps put notoriously-optimistic Wall Street projections in perspective.

Round 3: Operations

Advantage: Hewlett-Packard. Net margin percentage shows how efficiently a company turns revenue into profit. The more similar the business models, the more relevant the comparison.

Round 4: Balance sheet

Advantage: Hewlett-Packard. As with net margins, the debt to capital ratio is most relevant in comparing companies in similar industries. In this battle we give the nod to the lower-debt company, but attention should also be paid to the cost of debt, interest coverage ratios, and the stability of the business (the more stable a company’s operations, the more debt it can safely carry).

Round 5: CAPS rating

Advantage: Hewlett-Packard. A company’s CAPS rating is our community’s opinion of the stock. You can get more information on your stocks -- and our community’s opinions of those stocks -- by clicking over to CAPS area.

Each of these five rankings need more context -- like, how these companies stack up against key competitors such as IBM (NYSE: IBM ) and Sun Microsystems (Nasdaq: JAVA ) . But these basic numbers suggest that Hewlett-Packard is a better buy. What do you think? Let us know in the comments section below.

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No individual person selected the stocks in this article, so there is no author to disclose an interest in them. Since this article was automatically generated by identifying the stocks loved both by the CAPS community and by buyers in today’s market, it is possible that Motley Fool personnel (and even The Motley Fool itself, through our Million Dollar Portfolio, Motley Fool Pro, and Ready Made Millionaire services), have positions in these stocks. We thought you'd like to know that. You can learn more about The Motley Fool’s disclosure policy here.

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment icon found on every comment.

Report this Comment On December 09, 2009, at 1:30 PM, DeSisto07 wrote:

I have bought Dells for the past 15 years but I will never buy another one. About a month ago, I purchased a Dell Laptop online with a "top of the line" 4 year warranty. When I got the laptop it would not automatically connect to my wireless printer on my home network. I called Dell's 800 number and after a half hour wait I spoke to someone that I could not understand (in India). I politely asked to speak to an English speaking person and I was told "there was an extra charge for that". I said then connect me to the the Returns dept. and I returned the computer. Some customer service!
I went to Best Buy and bought an HP. I can't believe that I am alone in my experience with Dell.
Report this Comment On December 09, 2009, at 1:39 PM, Fool wrote:

HP has been terrific. I've always had problems with Dell. Not a good buy at all.
Report this Comment On December 09, 2009, at 4:23 PM, NoWayinDell wrote:

Dell was originally known for great customer service, but I bought my last Dell Computer about 10 years ago when I was starting a new company. The motherboard went out after 31 days. Dell advertises that you can return your computer for any reason within the first 30 days, but they wouldn't honor their policy because it had been 31 days, so I had to wait for over 2 weeks for them to fix my computer. I will never purchase another Dell product.
Report this Comment On December 09, 2009, at 4:24 PM, NoWayinDell wrote:

Now our company has over 600 employees and we only use H-P.... To Hell with Dell!
Report this Comment On December 09, 2009, at 6:24 PM, cfa81611 wrote:

I've always been happy with Dell. All large companies have some disgruntled former customers. From an investment standpoint--I remember when HP was "going out of business," Dell was "untouchable" and Apple was "dead." Don't get too caught up in the hype. At some point Dell will be eating HP's lunch and vice versa. We're talking about two large cap well established companies. They'll both be fine.
Report this Comment On December 09, 2009, at 11:08 PM, Fool wrote:

All I've ever owned were Dells, Apples and HPs. About the only thing Dell and HP add to what Intel/MS makes is hype.
If I were rating either of these companies on innovation I'd give them both a D. Apple would get a A- for truly caring about the customer and innovating *for* its customers, not dressing up the Intel/MS pig with yet more lipstick.
Report this Comment On December 10, 2009, at 12:26 AM, Fool wrote:

It seems too many folks are getting caught up in customer service companies provide. Let's face it all tech companies outsource. And Dell seems to be on the bad side of it at the moment.
But, when it comes to stock, face the facts. At the moment HP is a much better buy. If you look at a 2 year growth rate since the ecomony has started failing in 08, HP is flat. Dell has declined 28%. They are both performing better than the S&P 500. But HP is the clear winner.
But, this proves (along with earnings, etc) that HP, at least in recent history, has better managed their business. Dell is lost. They are grasping at straws for fixes. Their business model doesn't work anymore, and they don't know how to make a new one work.
People want to touch and see their computers when they buy them. The mail order business is a stale one. Funny, but Carly Fiorina predicted this years ago. Well its here. The problem for Dell is that HP's retail channel is so strong and refined that HP is going gangbusters. Dell is entering the retail market, but hurting profits in doing so.
Going back to the customer service issue, this is probably why HP's customer service is a level above Dell's and will only get better as HP has the money to invest in theirs while Dell does not.
Report this Comment On December 10, 2009, at 10:05 AM, dilfarb wrote:

LMAO at someone accusing HP/Dell of adding 'hype.' Apple is all about hype. Every try to run your enterprise on Apple? How about having Apple provide the IT services to run your company?
Apple owns the consumer space, which is great. Too bad they're not a player in the large enterprise space.

updated 7 hours ago Sponsored by:
	DOW	12,801.23	-89.23	-0.69%
	S&P 500	1,342.64	-9.31	-0.69%
	NASD	2,903.88	-23.35	-0.80%

HPQ	$28.70		-0.41	-1.41%
Hewlett-Packard Co…		CAPS Rating:

DELL	$17.75		-0.31	-1.72%
Dell		CAPS Rating:

JAVA.DL	$9.49		+0.00	+0.00%
Sun Microsystems,…		CAPS Rating:

IBM	$192.42		-0.71	-0.37%
International Busi…		CAPS Rating:

12

Better Buy: Hewlett-Packard or Dell?

Comments from our Foolish Readers

Report this Comment On December 09, 2009, at 1:30 PM, DeSisto07 wrote:

Report this Comment On December 09, 2009, at 1:39 PM, Fool wrote:

Report this Comment On December 09, 2009, at 4:23 PM, NoWayinDell wrote:

Report this Comment On December 09, 2009, at 4:24 PM, NoWayinDell wrote:

Report this Comment On December 09, 2009, at 6:24 PM, cfa81611 wrote:

Report this Comment On December 09, 2009, at 11:08 PM, Fool wrote:

Report this Comment On December 10, 2009, at 12:26 AM, Fool wrote:

Report this Comment On December 10, 2009, at 10:05 AM, dilfarb wrote:

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