DXC Technologies (NYSE:DXC) stock has climbed over 10% in the last 5 trading days, and was only one of 4 stocks in S&P 500 to do so – the others being Boeing and two cruise line companies. Interestingly, this is quite at odds with how the stock has performed in recent years. The question is – can it sustain? What are the chances it keeps up this trajectory over the next month, or 3 months or a year? Turns out, the chances are low. How do we know that? Our AI engine analyzes past patterns in stock movements to predict near term behavior, and suggests just a 19% probability of DXC jumping another 10% over the next 21 trading days. However, the chances of falling -10% during the same time frame are slightly higher at 22%. Relatively speaking, DXC seems less likely to move significantly in either direction over the next month compared to some of the other stocks we have published about. However, if we were to reduce the price movement range to 5%, the probability of the stock moving higher goes up to 31%. Our detailed dashboard highlights the chances of DXC’ stock rising after a fall and should help you understand near-term return probabilities for different levels of movements.
But what do the underlying fundamentals suggest? They don’t really encourage a buy decision. Our dashboard Big Movers: DXC Technology Company Moved 10.3% – What Next? lays this out.
DXC Technology Company’s stock price increased 10.3% last week. In comparison, the stock has decreased -52% between 2017 and 2019, and has decreased -77% between 2017 and now. So last week’s move is at complete odds with the dominant long-term trend, which means long-term investors should not read too much into it. Especially because underlying growth somewhat supports the dominant downward trend in the stock price. DXC Technology Company’s revenue more than tripled from $7,607 Mil in 2017 to $24,556 Mil in 2018 -but that’s because of acquisitions. The unfortunate bit is that despite this, the company could not maintain growth trajectory and its revenues fell in 2019. For the last 12 months, this figure stood at $19,189 Mil, implying further decrease of -7.5% over 2019 numbers. While net margins increased from -1.3% in 2017 to 6.1% in 2019, they plummeted to -29.8% in the last 12 months. Unfortunately, the timing of acquisitions was such that the the company ended up becoming bulky during the pandemic, when it actually needed to be leaner.
However, multiples suggest a different story. Compared to DXC Technology Company’s P/S multiple of 0.24, the figure for its peers ACN, CTSH, and CACI stands mostly higher at 3.3, 2.2, and 0.96 respectively. But there is a reason to this. These peers are performing better when it comes to cash flow, growth, and margins.
Taking all perspectives together, it appears that DXC may not be a very attractive investment opportunity at this point. In the meantime, here’s a high quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.