Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 3 stocks made the list for top value stocks in the Computer Hardware industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued Computer Hardware Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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3 Undervalued Computer Hardware Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 3 undervalued stocks in the Computer Hardware industry for Friday, February 16, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Computer Hardware industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

Dell Technologies Inc’s Value Grade

Value Grade:

Dell Technologies Inc. is an end-to-end technology provider that designs, develops, manufactures, markets, sells, and supports a range of comprehensive and integrated solutions, products, and services. The Company operates through two segments: Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG). Its ISG segment enables the Company?s customers? digital transformation with solutions that address the fundamental shift to multi-cloud environments, machine learning, artificial intelligence, and data analytics. The Company?s storage portfolio includes traditional as well as next-generation storage solutions, including all-flash arrays, scale-out file, object platforms, hyperconverged infrastructure, and software-defined storage. This segment also offers attached software, peripherals, and services. The CSG segment includes sales to commercial and consumer customers of branded hardware and branded peripherals, as well as services and third-party software and peripherals.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Dell Technologies Inc has a Value Score of 73, which is considered to be undervalued.

When you look at Dell Technologies Inc’s price-to-sales ratio at 0.66 compared to the industry median at 0.84, this company has a lower price relative to revenue compared to its peers. This could make Dell Technologies Inc’s stock more attractive for value investors.

Dell Technologies Inc’s price-earnings ratio is 22.90 compared to the industry median at 22.90. This means it has a similar share price relative to earnings compared to its peers. This could make Dell Technologies Inc fairly attractive for value investors.

Now, let’s assess Dell Technologies Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 7.2, when compared to the industry median of 9.3, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. Dell Technologies Inc’s shareholder yield is higher than its industry median ratio of (0.03%). Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

Lastly, let’s take a look at Dell Technologies Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Dell Technologies Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 14.90. This could make Dell Technologies Inc more attractive because the lower P/FCF ratio indicates that Dell Technologies Inc is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

Hewlett Packard Enterprise Co’s Value Grade

Value Grade:

Hewlett Packard Enterprise Company is a technology company. The Company operates through six segments: Compute, High Performance Computing & Artificial Intelligence (HPC & AI), Storage, Intelligent Edge, Financial Services (FS), and Corporate Investments and Other. The Compute segment consists of both general-purpose servers for multi-workload computing and workload-optimized servers. HPC & AI segment offers integrated systems comprised of software and hardware designed to address HPC, AI, Data Analytics, and Transaction Processing workloads for government and commercial customers. The Storage segment includes cloud-native primary storage with HPE Alletra Storage, software-powered hyper-converged infrastructure with HPE Alletra dHCI and HPE SimpliVity, data storage and management services. The Intelligent Edge segment offers wired and wireless local area network (LAN), campus and data center switching among others. The Financial Services segment provides flexible investment solutions.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Hewlett Packard Enterprise Co has a Value Score of 84, which is considered to be undervalued.

Hewlett Packard Enterprise Co’s price-earnings ratio is 9.9 compared to the industry median at 22.9. This means that it has a lower price relative to its earnings compared to its peers. This makes Hewlett Packard Enterprise Co more attractive for value investors.

Hewlett Packard Enterprise Co’s price-to-book ratio is higher than its peers. This could make Hewlett Packard Enterprise Co less attractive for value investors when compared to the industry median at 1.51.

You can read more about Hewlett Packard Enterprise Co’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Taoping Inc’s Value Grade

Value Grade:

Taoping Inc is a China-based company mainly providing cloud-app technologies for Smart City Internet of Things (IoT) platforms, digital advertising delivery, and other internet-based information distribution systems. The Company primarily operates through three segments. The Cloud-based Technology (CBT) segment mainly provides cloud-based products, high-end data storage servers and related services applied in private sectors including new media, healthcare, education and residential community management, and among other industries and applications. The Blockchain Technology (BT) segment is mainly engaged in cryptocurrency mining. The Traditional Information Technology (TIT) segment is mainly engaged in sales of project-based technology products and services and solutions, mainly including Geographic Information Systems (GIS), Digital Public Security Technology (DPST), and Digital Hospital Information Systems (DHIS).

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Taoping Inc has a Value Score of 68, which is considered to be undervalued.

Taoping Inc’s price-to-book ratio is higher than its peers. This could make Taoping Inc less attractive for value investors when compared to the industry median at 1.51.

You can read more about Taoping Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Computer Hardware Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Computer Hardware stocks as well as other industrys.

Choosing Which of the 3 Best Computer Hardware Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• Dell Technologies Inc stock has a Value Grade of B.
• Hewlett Packard Enterprise Co stock has a Value Grade of A.
• Taoping Inc stock has a Value Grade of B.

Now that you have a bit more background about each of the 3 undervalued stocks in the Computer Hardware industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Computer Hardware Stocks

Want to learn more about Computer Hardware stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 3 Undervalued Computer Hardware Stocks for Friday, February 16
• What You Need to Know About Insight Enterprises, Inc.'s Q4 Earnings
• Why Insight Enterprises, Inc.’s (NSIT) Stock Is Down 5.12%
• Why Knowles Corp’s (KN) Stock Is Up 5.03%

AAII Disclaimer

We make no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown, because past, hypothetical or simulated performance is not necessarily indicative of future results. Before making an investment decision, you should consider your circumstances and whether the information on our content is applicable to your situation. This information was prepared in good faith and we accept no liability for any errors or omissions. The full disclaimer can be read here.