DXC - Embedded Expectations Analysis - 2021 04 13
DXC Technology Company (DXC:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 16.2x Uniform P/E. At these levels, the market has bearish expectations for the firm, but management may be concerned about margin expansion, business stability, and client relationshipsSpecifically, management may lack confidence in their ability to stabilize revenues, maintain their book-to-bill ratio, and effectively reduce costs without disrupting their business. Furthermore, they may have concerns about secular headwinds surrounding their ITO layer, the impact of runoffs and terminations on organic revenue growth, and the sale of their U.S. State and Local Health and Human Services business. Finally, management may lack confidence in their ability to expand margins, sustain positive business momentum, and further enhance and rebuild customer and partner relationships
DXC Technology is an end-to-end IT services company. The company provides a range of information technology services and solutions primarily in North America, Europe, Asia, and Australia. The company operates through two segments: Global Business Services, which provides technology solutions that help the company's clients address main business challenges and improve digital transformations tailored to each client's industry and objectives; and Global Infrastructure Services, which provides a portfolio of offerings that deliver predictable outcomes and measurable results, while reducing business risk and operational costs for clients.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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