NEW YORK (TheStreet) -- Shares of EMC Corp. (EMC) are up 4.89% to $28.30 in pre-market trade after Elliott Management Corp. took a stake of over $1 billion in the date storage company and plans to push it to break itself up, sources told the Wall Street Journal.
The investment, which hasn't been previously disclosed, amounts to about 2% of the company's $55 billion equity value, and would make the hedge fund its fifth-largest shareholder, according to FactSet data.
Elliott will attempt to convince EMC that the company's lagging stock would receive a substantial boost if it were to spin off VMWare (VMW),, sources said, the Journal noted.
EMC owns about a 80% stake in VMware.Must Read: Warren Buffett's 25 Favorite Growth Stocks
- Despite its growing revenue, the company underperformed as compared with the industry average of 2.1%. Since the same quarter one year prior, revenues slightly increased by 1.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Although EMC's debt-to-equity ratio of 0.24 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.21, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for EMC CORP/MA is rather high; currently it is at 69.15%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, EMC's net profit margin of 7.15% significantly trails the industry average.
- EMC CORP/MA's earnings per share declined by 26.9% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, EMC CORP/MA increased its bottom line by earning $1.33 versus $1.23 in the prior year. This year, the market expects an improvement in earnings ($1.90 versus $1.33).
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Computers & Peripherals industry and the overall market, EMC CORP/MA's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full analysis from the report here: EMC Ratings Report
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts