Dell (Nasdaq: DELL) may have me eating crow. Have you noticed how some turnarounds never seem to actually turn around? Dell certainly looked like one of them.

The company had been trying to turn the corner for six years with no success. After Hewlett-Packard (NYSE: HPQ) came from behind to overtake Dell in PC sales mid-last decade, Dell couldn't seem to get back on its feet. By early 2006, management acknowledged that it needed to do something differently, but EPS was still below peak levels when the global recession hit. Then a July 2010 Securities and Exchange Commission settlement revealed marketing co-payments from Intel (Nasdaq: INTC) accounted for a good portion of Dell's impressive operating margins prior to HP's comeback and raised questions about the profitability of Dell's model.

Over the last couple of quarters EPS improved dramatically, but many investors -- myself included -- attributed it to easy comparables and a post-recession surge in corporate IT spending. Management guided to decelerating revenue growth and a rising tax rate this year. Cost savings appeared to be waning and Dell's core businesses were stagnating. Guidance was cautious.

But Dell's earnings release on Tuesday suggests the company has turned the corner. Dell has moved beyond talking about enterprise computing to executing around profits. It's as if Dell has borrowed a page from IBM's (NYSE: IBM) playbook. And gets it. And is executing on it.

Though revenue grew a disappointing 1% year over year, non-GAAP operating income grew 67% and non-GAAP EPS grew 83%. Gross margin and operating margin expanded. The tax rate declined relative to last year. Favorable component pricing helped, but management indicated the margin improvement had more to do with improving execution and product mix and a focus on solution selling.

Management raised operating income guidance for the year to growth of 12% to 18%. That still suggests the big improvements are behind Dell. During the earnings call several analysts cited guidance in questioning the sustainability of the margin improvements. My take is that if things go well guidance will prove cautious.

Foolish takeaway
Dell appears to have reset its business. For years it produced non-GAAP EPS that ranged from $1.05 to $1.35 per year. For just the last two quarters non-GAAP EPS is $1.08. Dell appears on track to produce non-GAAP EPS of $2 or more this year, well above the consensus forecast of $1.70. Even at its current P/E multiple of 10 times, that makes it a $20 stock ... a nice gain from its closing price of $15.90 going into the earnings release.

If the company can build on its recent success, non-GAAP EPS could be $2.20 or more. What's more, investors could reward it with a higher multiple. A P/E of 12 times and EPS of $2.20 would get the stock to $26.40.

What do you think? Is Dell stock on its way to $26? An easy way to stay on top of market developments is The Motley Fool's free My Watchlist feature. You can get up-to-date news and analysis by adding these stocks to your watchlist now:

Fool contributor Cindy Johnson does not own shares of any company mentioned in this story. The Motley Fool owns shares of International Business Machines. The Fool owns shares of and has bought calls on Intel. Motley Fool newsletter services have recommended Intel. Motley Fool newsletter services have recommended creating a diagonal call position in Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.