DXC Technology Co (DXC, Financial) recently experienced a significant daily loss of -12.15%, yet it has managed a 3-month gain of 6.89%. With a Loss Per Share standing at $2.47, investors are contemplating whether the stock is modestly undervalued. This article delves into the valuation of DXC Technology Co (DXC) to uncover potential investment opportunities.
Company Introduction
DXC Technology Co is a leading vendor-independent IT services provider, operating through segments such as Global Business Services (GBS) and Global Infrastructure Services (GIS). The GIS segment, which encompasses offerings like Cloud and Security, IT Outsourcing, and Modern Workplace, is the company's primary revenue generator. With a significant presence in the Other Europe region, DXC Technology Co's market valuation is a topic of interest for investors, especially when considering the company's GF Value of $29.55 against its current stock price of $21.99.
Summarize GF Value
The GF Value is a unique metric that estimates the intrinsic value of a stock, taking into account historical trading multiples, a GuruFocus adjustment factor based on past business growth, and future business performance projections. This valuation model suggests that DXC Technology Co (DXC, Financial) is modestly undervalued. The GF Value Line, a visual indicator of fair value, implies that the stock's long-term return potential is promising, given its current price below the GF Value.
Because DXC Technology Co is relatively undervalued, the long-term return of its stock is likely to outpace its business growth, presenting an attractive proposition for investors.
Financial Strength
Investing in companies with robust financial strength is critical to mitigate the risk of capital loss. DXC Technology Co's cash-to-debt ratio of 0.27 places it in a less favorable position than 82.25% of its peers in the Software industry. With a financial strength ranking of 5 out of 10, the company's financial health is deemed fair, necessitating a closer examination of its debt and cash flow history.
Profitability and Growth
DXC Technology Co's track record of profitability over the past decade adds a layer of security for potential shareholders. Despite a Loss Per Share of $2.47 in the last twelve months and an operating margin that ranks below half of its industry counterparts, the company's profitability rank is a moderate 5 out of 10. Growth, however, is a concern, with revenue and EBITDA growth rates trailing behind the majority of the Software industry.
ROIC vs WACC
Evaluating a company's profitability also involves comparing its Return on Invested Capital (ROIC) with the Weighted Average Cost of Capital (WACC). Ideally, a company's ROIC should exceed its WACC to indicate efficient capital management. For DXC Technology Co, the ROIC of 1.77 is significantly lower than its WACC of 6.7, suggesting that the company's capital allocation efficiency could be improved.
Conclusion
In summary, DXC Technology Co (DXC, Financial) appears modestly undervalued, offering a potentially higher long-term return relative to its business growth. The company's financial condition and profitability are adequate, though its growth lags significantly behind its industry peers. Those interested in gaining a deeper understanding of DXC Technology Co's financials can explore its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
