working pattern internet abstract

DXC Technology Q2 Earnings: Is NYSE:DXC Cheap at 1.0x Price/Book?

in EARNINGS/INVESTING IDEAS by

DXC Technology Company (NYSE:DXC) is scheduled to report Q2 earnings results on November 5, 2020.

The company is expected to report earnings of $0.37/share on revenue of $4.464 billion. The consensus earnings per share (EPS) of $0.37/share is based on a poll of 12 analysts and represents a decline in eps of −73.0% over the same quarter last year, when the company reported earnings of $1.38/share.

The revenue forecast of $4.464 billion based on a poll of 10 analysts implies a year-over-year (YoY) decline in revenue of −8.0%. Last year the company reported $4.851 billion in revenue for the quarter.

Expected to report EPS contraction of −73.0% for Q2, 2021
Metric Expected Prior Year YoY Change
Revenue $4,464.33 $4,851.00 −8.0%
EPS $0.37 $1.38 −73.0%

Earnings Call Trends

Historically, management has exceeded analyst expectations 7 out of the last 8 tracked quarters, and missed expectations 1 quarter.

What are your expectations from DXC Technology Company for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q1, 2021 $0.11 $0.21 84.1% Beat
Q4, 2020 $0.96 $1.20 25.3% Beat
Q3, 2020 $1.08 $1.25 15.3% Beat
Q2, 2020 $1.43 $1.38 −3.3% Missed
Q1, 2020 $1.71 $1.74 1.9% Beat
Q4, 2019 $2.09 $2.19 4.9% Beat
Q3, 2019 $2.05 $2.23 9.0% Beat
Q2, 2019 $1.94 $2.02 4.0% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by increasing 7.7%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 6, 2020 $18.48 $19.90 7.7% Increase
May 28, 2020 $17.68 $14.21 −19.6% Decline
February 6, 2020 $34.50 $32.70 −5.2% Decline
November 11, 2019 $30.08 $35.25 17.2% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −4.01, the model suggests that the company is not likely to be an earnings manipulator. A value of −4.01 implies a 0.0% chance of earnings manipulation.

Fundamentals And Technical Analysis

DXC Technology Company is currently trading at $17.82/share, down −0.2% for the day. The company is trading at approximately 46.7% of its 52-week high of $38.37/share. The company’s stock price is down −10.5% since the last earnings report and down −10.2% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 34.84 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:DXC Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of −0.79 and a forward P/E multiple of 8.97.

DXC Technology Company’s current share price also implies a price-to-book (P/B) multiple of 0.98. The following table summarizes some other key fundamental ratios:

Data as of October 28, 2020
Metric Value
Last Reported Fiscal Period Key FY2021.Q1
Period End Date June 30, 2020
Stock Price (Current) $17.82
P/E Ratio −0.8x
P/E Ratio (Fwd) 9.0x
PEG Ratio 0.0
Total Debt / Total Capital 73.7%
Levered Free Cash Flow $2.195 billion
EV / EBITDA 4.4x

Finbox

DXC Technology Company is a mid-cap stock with a market capitalization of $4.537 billion and a total enterprise value of $13.089 billion. The company operates in the Information Technology sector and the IT Services industry.

DXC Technology Company, together with its subsidiaries, provides information technology services and solutions primarily in North America, Europe, Asia, and Australia. It operates in two segments, Global Business Services (GBS) and Global Infrastructure Services (GIS). The GBS segment offers a portfolio of analytics services and extensive partner ecosystem that help its customers to gain rapid insights, automate operations, and accelerate their digital transformation journeys; and software engineering and solutions that enable businesses to run and manage their mission-critical functions, transform their operations, and develop new ways of doing business. This segment also uses various technologies and methods to accelerate the creation, modernization, delivery, and maintenance of secure applications allowing customers to innovate faster while reducing risk, time to market, and total cost of ownership. In addition, it offers business process services, which include digital integration and optimization of front and back office processes, and agile process automation. The GIS segment adapts legacy apps to cloud, migrate the right workloads, and securely manage their multi-cloud environments; and offers security solutions help predict attacks, proactively respond to threats, and ensure compliance, as well as to protect data, applications, and infrastructure. It also provides IT outsourcing services support infrastructure, applications, and workplace IT operations, including hardware, software, physical/virtual end-user devices, collaboration tools, and IT support services. In addition, this segment offers workplace and mobility services to fit its customer’s employee, business, and IT needs from intelligent collaboration; and modern device management, digital support services, Internet of Things and mobility services. The company was founded in 1959 and is headquartered in Tysons, Virginia.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.