Is EMC Corporation (EMC) A Good Stock to Buy?

We can also compare EMC Corporation (NYSE:EMC) to peers such as NetApp Inc. (NASDAQ:NTAP), Oracle Corporation (NASDAQ:ORCL), and Cisco Systems, Inc. (NASDAQ:CSCO). NetApp and Cisco trade at 12 to 13 times forward earnings estimates, roughly matching EMC’s valuation on that basis. These figures imply that analysts are looking for low earnings growth at Cisco but significant improvements on NetApp’s bottom line: that stock is valued at over 25 times its trailing earnings. NetApp’s fiscal year ended in April, and in the fourth quarter there was little change in either revenue or earnings compared to the same period in the previous fiscal year. Cisco’s business has been doing better, with net income up 15% in its last quarterly report compared to a year ago, and we’d be interested in taking a closer look at the company. Oracle features trailing and forward P/Es of 14 and 10, respectively, so little growth is required in order to make it a good value. We’d note that while earnings have been up going by recent reports there has been little change in revenue, and so we’d be concerned as to how sustainable its earnings growth might be.

Out of these three peers, Cisco seems to be the most intriguing prospect from a value perspective. As for EMC (and VMware to some degree, though as we’ve mentioned we don’t like its high earnings multiple on current year forecasted earnings) it is good that there is a strong buyback program but even if the company hits its earnings targets for this year the valuation will still be high enough that we will want to see growth in net income, not just EPS.

Disclosure: I own no shares of any stocks mentioned in this article.