DXC Technology (DXC) assists multinational corporations in running mission-critical systems and operations while modernizing IT, optimizing data structures, and ensuring security and scalability in the public, private, and hybrid cloud.
The stock of Mc Lean, Va.-based concern has gained 15.9% in price in the past month.
However, the company reported weak finances in the last reported quarter. In addition, the business revised its revenue contraction forecast for 2022 from the 1% – 2% range to the 2.2% – 2.3% range. This could affect its stock price performance in the coming weeks.
Here’s what could shape DXC’s performance in the near term:
Positive Development
Last month, DXC announced the launch of a new global DXC ServiceNow Strategic Business Group to offer market-leading, cost-effective, robust technology services that transform corporate service operations based on the DXC Platform XTM. DXC has designated ServiceNow as the preferred workflow partner for DXC Platform X, a data-driven, intelligent automation platform that helps detect, prevent, and resolve stable and self-healing issues. IT estates.
Appreciation Discounts
In terms of forward non-GAAP P/E, the stock is currently trading at 10.58x, which is 51.5% lower than the 21.80x industry average. Also, its 0.58x forward Price/Sales multiple is 84.42% lower than the 3.72x industry average. Furthermore, DXC’s 1.98x forward Price/Book is 63.50% lower than the 5.43x industry average.
Poor Finance
DXC’s total revenue dropped 4.6% year-over-year to $ 4.09 billion for the third quarter, which ended in Dec. 31, 2021. Its operating expenses grew 69.8% from the previous quarter to $ 3.92 billion. And the company’s net income dropped 91.1% from its previous value of $ 98 million, while its EPS declined 91.1% year-over-year to $ 0.38.
Mixed Earnings
The 22.5% trailing of the DXC-12-month gross profit margin is 54.9% lower than the 49.9% industry average. Also, its ROC, levered FCF margin, and CAPEX/Sales multiples were 62.7%, 64.3%, and 30.7%lower than their respective industry averages. However, DXC’s $ 950 million trailing-12-month cash from operations was 807.1% higher than the industry average of $ 104.73 million.
POWR Ratings Reflect Uncertainty
DXC has an overall C rating, which is equivalent to Neutral in our possession POWR Ratings system. POWR ratings were calculated by considering 118 different factors, each factor being weighed at an optimal level.
Our proprietary rating system also evaluates each stock based on eight different categories. DXC has a C grade for Stability and Quality. The stock’s 2.35 beta is synced to Stability grade. In addition, the mix of the company’s profitability and poor finances is consistent with the Quality score.
Among 81 D-rated stocks Technology – Services industry, DXC is ranked #30.
Beyond what I said above, one can look at DXC’s ratings for Growth, Value, Momentum, and Sentiment here.
Bottom Line
DXC shares gained 46.2% in price last year based on the company’s strategic investments to boost growth in its various business segments. However, analysts expect its revenue to decline 7.6% year-over-year to $ 16.39 billion in fiscal 2022. In addition, the company’s mixed profitability and weak finances pose a threat to near-term price performance. its. So, we think investors should wait before taking parts of it.
How Is DXC Technology Company (DXC) Seen Against Its Peers?
While DXC has an overall C rating, one might wish to consider its industry peers, Sanmina Corporation (SANM), Celestica Inc. (CLS), and PC Connection Inc. (CNXN) with an overall A (Strong Buy) rating.
DXC shares were trading at $ 38.24 per share on Thursday morning, down $ 0.39 (-1.01%). Year-to-date, the DXC gained 18.79%, compared to a -4.42% increase in the benchmark S&P 500 index over the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with an investment passion. In college he graduated in finance and is currently pursuing the CFA program and is a Level II candidate. More…
More Resources for Stocks in this Article
.