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Here's Why You Should Add Xerox (XRX) to Your Portfolio

Zacks Equity Research

A wise investment decision involves buying well-performing stocks at the right time and selling those that are at risk. A rise in share price and strong fundamentals signal a stock’s bullish run.

Xerox Corporation XRX is a Business Services stock that has performed well year to date and has the potential to carry the momentum forward. Therefore, if you haven’t taken advantage of the share price appreciation yet, it’s time you add the stock to your portfolio.

What Makes Xerox an Attractive Pick?

An Outperformer: A glimpse of the company’s price trend reveals that the stock has had an impressive run on the bourse year to date. Xerox’s shares have surged 53.3%, outperforming the 33.5% rise of the industry it belongs to and 9.5% gain of the Zacks S&P 500 composite.

 

Solid Rank & VGM Score: Xerox has a Zacks Rank #2 (Buy) and a Value Growth Momentum Score (VGM Score) of B. Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or #2 offer the best investment opportunities for investors. Thus, the company appears to be a compelling investment proposition at the moment.You can see the complete list of today’s Zacks #1 Rank stocks here.

Northward Estimate Revisions: One estimate for the current year moved north in the past 60 days versus no southward revision, reflecting analysts’ confidence in the company. Over the same period, the Zacks Consensus Estimate for 2019 increased 2.7%.

Strong Growth Prospects:The Zacks Consensus Estimate for 2019 earnings is currently pegged at $3.76, reflecting year-over-year growth of 8.7%. Moreover, earnings are expected to register 6.1% growth in fiscal 2019.

Growth Factors: Xerox has decided to reorganize as a wholly-owned subsidiary of a new holding company to attain greater strategic, operational and financial flexibility.

A holding company structure helps to protect patents, reduce tax bill and diversify businesses efficiently. So, the move seems appropriate as Xerox is executing a Strategic Transformation program to achieve productivity and cost reduction. Also, the company has an aggressive product development program in new high growth markets.It is anticipated to be completed in the middle of the year.

Xerox has a post-sale driven business model that provides significant recurring revenues and cash generation. This business model enables the company to make strategic investments and penetrate in markets with high growth potential. Around 78% of the company’s total revenues in 2018 was post-sale based encompassing managed print services, equipment maintenance services, consumable supplies and financing.

Xerox has expanded its Small and Mid-sized (SMB) coverage through distribution acquisitions. In 2017, the company acquired Ohio-based multi-brand dealer MT Business Technologies and two other multi-brand dealers in North and South Carolina and Iowa. These acquisitions have provided market opportunities to the company in large metropolitan regions.

Other Stocks to Consider

Some other top-ranked stocks in the broader Zacks Business Services sector are Omnicom OMC, Robert Half RHI and Automatic Data Processing ADP. While Robert Half sports a Zacks Rank #1, Omnicom and Automatic Data Processing carry a Zacks Rank #2.

Long-term expected EPS (three to five years) growth rate for Omnicom, Robert Half and Automatic Data Processing is 6.9%, 8.4% and 12.8%, respectively.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

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Omnicom Group Inc. (OMC) : Free Stock Analysis Report
 
Xerox Corporation (XRX) : Free Stock Analysis Report
 
Robert Half International Inc. (RHI) : Free Stock Analysis Report
 
Automatic Data Processing, Inc. (ADP) : Free Stock Analysis Report
 
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