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A dynamometer can and will directly measure HP with a high degree of accuracy dependent only on the measurement of the electrical output of the driven dynamo. Also torque if the dynamo is as is usual arranged free to rotate against a lever and weight or calibrated spring.
But the Ò dyno Ò you pay to put your car on is usually based on a water brake and is not a dynamometer even though the title given it indicates otherwise. As Harvey has pointed out these machines can only measure torque with any degree of accuracy.
The HP readings which they produce are very much subjective and calibration is always in doubt as is repetitive accuracy. On top of this all the factors and limitations in respect of a road wheel driven device further reduce the prospect of accurate readings.
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Trevor, New Zealand.
As a child, on cold mornings I gladly stood in cowpats to warm my bare feet, but I detest bull$hit! 
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