DXC Technology Co (NYSE: DXC)

Sector: Technology Industry: Information Technology Services CIK: 0001688568
Market Cap 2.70 Bn
P/B 0.88
P/E 7.23
P/S 0.21
ROIC (Qtr) 2.53
Div Yield % 0.00
Rev 1y % (Qtr) -2.47
Total Debt (Qtr) 4.69 Bn
Debt/Equity (Qtr) 1.53

About

DXC Technology Company, known as DXC Technology, is a prominent player in the global IT services industry. The company operates through two segments: Global Business Services (GBS) and Global Infrastructure Services (GIS), offering a variety of products and services to approximately 130,000 customers across 65 countries. These customers include nearly half of the Fortune 500 companies, spanning various sectors such as finance, healthcare, insurance, and retail. DXC Technology generates revenue through an array of offerings, which can be categorized...

Read more

Price action

Investment thesis

Bull case

  • Operating cash flow of 1.56B provides exceptional 141.82x coverage of minority interest expenses 11M, showing strong core operations.
  • Operating cash flow of 1.56B provides strong 20.26x coverage of stock compensation 77M, indicating sustainable incentive practices.
  • Robust free cash flow of 1.43B exceeds capital expenditure of 132M by 10.82x, indicating strong organic growth funding capability.
  • Tangible assets of 11.19B provide exceptional 8.83x coverage of deferred revenue 1.27B, showing strong service capability backing.
  • Robust tangible asset base of 11.19B provides 26.01x coverage of working capital 430M, indicating strong operational backing.

Bear case

  • Operating cash flow of 1.56B barely covers its investment activities of (476M), with a coverage ratio of -3.28, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 1.56B provides insufficient coverage of deferred revenue obligations of 1.27B, which is 1.23x, raising concerns about future service delivery capabilities.
  • Operating earnings of 887M show weak coverage of depreciation charges of 1.26B, with a 0.71 ratio indicating high capital intensity and potential reinvestment needs.
  • High depreciation of 1.26B relative to operating cash flow of 1.56B, which is 0.81x suggests significant maintenance capital requirements affecting free cash flow.
  • Free cash flow of 1.43B represents just -5.95x of debt issuance (240M), suggesting concerning reliance on leverage rather than internal cash generation for growth.

Peer comparison

Companies in the Information Technology Services
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 IBM International Business Machines Corp 279.99 Bn 35.41 4.28 66.57 Bn
2 ACN Accenture plc 168.17 Bn 22.09 2.38 8.20 Bn
3 INFY Infosys Ltd 74.96 Bn 23.74 3.89 -
4 CTSH Cognizant Technology Solutions Corp 41.45 Bn 19.48 1.99 1.17 Bn
5 FIS Fidelity National Information Services, Inc. 35.21 Bn 231.62 3.36 13.00 Bn
6 WIT Wipro Ltd 29.93 Bn 19.70 2.97 1.95 Bn
7 BR Broadridge Financial Solutions, Inc. 26.38 Bn 28.51 3.74 3.28 Bn
8 LDOS Leidos Holdings, Inc. 23.72 Bn 16.88 1.37 5.23 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.42 1.44
EV to Cash from Ops. EV/CFO 3.66 5.63
EV to Debt EV to Debt 1.21 8.06
EV to EBIT EV/EBIT 6.43 -4.05
EV to EBITDA EV/EBITDA 2.91 -0.52
EV to Free Cash Flow [EV/FCF] EV/FCF 3.99 -1.66
EV to Market Cap EV to Market Cap 2.12 1.35
EV to Revenue EV/Rev 0.45 57.14
Price to Book Value [P/B] P/B 0.88 3.34
Price to Earnings [P/E] P/E 7.23 -5.47
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 0.00 -0.83
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 0.66
Dividend per Basic Share Div per Share (Qtr) 0.00 0.47
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 6.24
Interest Coverage Int. cover (Qtr) 3.84 -319.17
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -59.04 -253.62
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 51.65 114.15
Dividend Growth (1y) % Div 1y % (Qtr) 0.00 35.23
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 316.86 -22.49
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 35.88 -25.03
EBIT Growth (1y) % EBIT 1y % (Qtr) 141.03 -82.44
EBT Growth (1y) % EBT 1y % (Qtr) 798.63 97.07
EPS Growth (1y) % EPS 1y % (Qtr) 930.00 147.29
FCF Growth (1y) % FCF 1y % (Qtr) 6.89 -8,638.64
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 1.33 -8.24
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.94 0.78
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.01
Cash Ratio Cash Ratio (Qtr) 0.38 0.66
Current Ratio Curr Ratio (Qtr) 1.09 2.12
Debt to Equity Ratio Debt/Equity (Qtr) 1.53 0.88
Interest Cover Ratio Int Coverage (Qtr) 3.84 -319.17
Times Interest Earned Times Interest Earned (Qtr) 3.84 -319.17
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 16.90 -550.76
EBIT Margin % EBIT Margin % (Qtr) 6.98 -775.74
EBT Margin % EBT Margin % (Qtr) 5.16 -827.89
Gross Margin % Gross Margin % (Qtr) 24.60 24.07
Net Profit Margin % Net Margin % (Qtr) 2.90 -830.34