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DXC Technology (DXC) Soars to a 52-Week High, Time to Cash Out?

Have you been paying attention to shares of DXC Technology CompanyDXC ? Shares have been on the move with the stock up 16.1% over the past month. DXC hit a new 52-week high of $107.13 in the previous session. DXC Technology has gained 12.46% since the start of the year compared to the 9.16% move for the Computer and Technology sector and the 8.54% year-to-date return for its peer group.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, having beaten the Zacks Consensus Estimate in each of the last four quarters. In its last earnings report on February 8, 2018, DXC Technology reported EPS of $2.15 versus the Zacks Consensus Estimate of $1.99 while it missed the consensus revenue estimate by 0.69%.

For the current fiscal year, DXC Technology is expected to post earnings of $7.83 per share on $24.38 billion in revenues. This represents a 153.55% change in EPS on a 220.46% change in revenues. For the next fiscal year, the company is expected to earn $9.03 per share on $24.25 billion in revenues. This represents changes of 14.89% and -0.53%, respectively.

Valuation Metrics

While DXC has moved to its 52-week high in the recent past, investors need to be asking, what is next for the company? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

DXC Technology has a Value Score of B. The stock's Growth and Momentum Scores are A and A, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 13.63x current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 13.43x versus its peer group's average of 17.05x. Additionally, the stock has a PEG ratio of 1.3. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

DXC Technology Company. Price and Consensus

DXC Technology Company. Price and Consensus | DXC Technology Company. Quote

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, DXC Technology currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 and Style Scores of A or B, it looks as if DXC Technology meets the list of requirements. Thus, it seems as though DXC shares could still be poised for more gains ahead.

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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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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