Should Value Investors Buy DXC Technology (DXC) Stock?
Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.
Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.
On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.
One stock to keep an eye on is DXC Technology (DXC). DXC is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with a P/E ratio of 7.13, which compares to its industry's average of 18.36. Over the past year, DXC's Forward P/E has been as high as 12.97 and as low as 5.66, with a median of 10.05.
Investors should also note that DXC holds a PEG ratio of 1.08. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. DXC's PEG compares to its industry's average PEG of 1.68. Within the past year, DXC's PEG has been as high as 1.54 and as low as 0.90, with a median of 1.10.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. DXC has a P/S ratio of 0.79. This compares to its industry's average P/S of 2.03.
These figures are just a handful of the metrics value investors tend to look at, but they help show that DXC Technology is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, DXC feels like a great value stock at the moment.
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