DISCLAIMER: Warrants are EXTREMELY risky and should see them as a loss potential of 100%. The views here are a codification of how I am thinking about this company and the interesting aspects of the potential loss or gain that can take place. At anytime I maybe invested and this should never be considered investment advice. Consult your financial advisor or who ever you work with on your own personal investment decisions.
Thanks for reading The Genius’s Stock Market Newsletter! Subscribe for free to receive new posts and support my work.
Before I go into my summary, I want to preface the work on DXC 0.00%↑ was a bigger project due to my penchant on providing quality improvements on the content freely received. I hope the summary brings value beyond what you have given.
Recommendation:
Bullish trading/investing strategies
Company Overview/Description:
DXC helps Fortune 1000 firms do relatively simple things like run their back offices, as well as very difficult tasks like writing sophisticated software. Operates two segments of its business Global Business Services (GBS) and Global Infrastructure Services (GIS.)
Opportunity / Setup / investment Thesis
Original spinoff/merger rationale that created DXC failed to deliver. Watched $25Billion revenue evaporate and near future shows no signs of slowdown. 2019 was the year of lower margin business mod and 2020 was the accelerant towards a worsening entity despite significant growth IT industry for digitization/Internet of Things/Web 4.0
Catalyst / Why now
Assets sales, continued share buybacks to significantly reduce outstanding shares, reinstitution of suspended 2020 dividends
A focus on increasing free cash flow for the long term, continued asset sales to improve top line profit margins along with access to capital debt markets for more meaningful near term share buybacks and dividend reinstatement to return capital excess capital to shareholders.
Valuation & returns
Applying my conservative calculations, a 12x multiple would seem reasonable given the current investing environment and at current price of $26 pps DXC’s valuation is absurdly cheap. Peer comps show DXC’s GIS segment is valued appropriately given DXC’s $9B+ total enterprise value but comps for the GBS segment (the hidden growth story) trades as if the company is under bankruptcy for 20 cents on the dollar which is far from the balance sheet story the company has filed. 2025 normalized earnings interesting in my scenarios.
Management base case free cash flow projection for 2024 management expects $7 pps.
Risks & mitigation steps
Foreign currency and strong U.S. dollar polices
adding strong foreign bank and high cash over-reserved foreign insurance stock to portfolio
DXC under prices its contracts where expenses are not covered particularly for labor cost.
Worst Case Scenario and how to avoid it
Company is unable to attract away the recently unemployed data engineer talent out of the likes of Facebook, Twitter as well other big names.
I also would like to remark on the importance of position sizing. Any investment write up you see from the bulge bracket investment research firms to the top gurus online, sizing an investment appropriately should always be front of mind as any investment idea from being a start up entrepreneur, aspiring real estate mogul, day trader or retirement portfolio investing, these all have a high level of degree of risk. Do you invest 1%, 100% or nothing at all have risks and probability outcomes involved that no one outside of you and especially not me can tell you if you should invest. Do not forget investments are not only about choosing the right investment but also about likelihoods/probabilities of success and failure and how much of ones’ net worth to commit. Below is an example of what I view as a General in a portfolio allocation structure. I will have a deeper write up but most likely will put it behind a paywall. I will continue do more of these TL;DR summary writeup as part of the free availability but the ideas will not be my top ideas. TL;DR Summaries will be more of a window into my thinking of investments and geared toward lower quality investment ideas where I am neutral / slight bullish.
DXC Technology (DXC) TL;DR Summary
DXC Technology (DXC) TL;DR Summary
DXC Technology (DXC) TL;DR Summary
DISCLAIMER: Warrants are EXTREMELY risky and should see them as a loss potential of 100%. The views here are a codification of how I am thinking about this company and the interesting aspects of the potential loss or gain that can take place. At anytime I maybe invested and this should never be considered investment advice. Consult your financial advisor or who ever you work with on your own personal investment decisions.
Thanks for reading The Genius’s Stock Market Newsletter! Subscribe for free to receive new posts and support my work.
Share
Before I go into my summary, I want to preface the work on DXC 0.00%↑ was a bigger project due to my penchant on providing quality improvements on the content freely received. I hope the summary brings value beyond what you have given.
Recommendation:
Bullish trading/investing strategies
Company Overview/Description:
DXC helps Fortune 1000 firms do relatively simple things like run their back offices, as well as very difficult tasks like writing sophisticated software. Operates two segments of its business Global Business Services (GBS) and Global Infrastructure Services (GIS.)
Opportunity / Setup / investment Thesis
Original spinoff/merger rationale that created DXC failed to deliver. Watched $25Billion revenue evaporate and near future shows no signs of slowdown. 2019 was the year of lower margin business mod and 2020 was the accelerant towards a worsening entity despite significant growth IT industry for digitization/Internet of Things/Web 4.0
Catalyst / Why now
Assets sales, continued share buybacks to significantly reduce outstanding shares, reinstitution of suspended 2020 dividends
A focus on increasing free cash flow for the long term, continued asset sales to improve top line profit margins along with access to capital debt markets for more meaningful near term share buybacks and dividend reinstatement to return capital excess capital to shareholders.
Valuation & returns
Applying my conservative calculations, a 12x multiple would seem reasonable given the current investing environment and at current price of $26 pps DXC’s valuation is absurdly cheap. Peer comps show DXC’s GIS segment is valued appropriately given DXC’s $9B+ total enterprise value but comps for the GBS segment (the hidden growth story) trades as if the company is under bankruptcy for 20 cents on the dollar which is far from the balance sheet story the company has filed. 2025 normalized earnings interesting in my scenarios.
Management base case free cash flow projection for 2024 management expects $7 pps.
Risks & mitigation steps
Foreign currency and strong U.S. dollar polices
adding strong foreign bank and high cash over-reserved foreign insurance stock to portfolio
DXC under prices its contracts where expenses are not covered particularly for labor cost.
Worst Case Scenario and how to avoid it
Company is unable to attract away the recently unemployed data engineer talent out of the likes of Facebook, Twitter as well other big names.
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I also would like to remark on the importance of position sizing. Any investment write up you see from the bulge bracket investment research firms to the top gurus online, sizing an investment appropriately should always be front of mind as any investment idea from being a start up entrepreneur, aspiring real estate mogul, day trader or retirement portfolio investing, these all have a high level of degree of risk. Do you invest 1%, 100% or nothing at all have risks and probability outcomes involved that no one outside of you and especially not me can tell you if you should invest. Do not forget investments are not only about choosing the right investment but also about likelihoods/probabilities of success and failure and how much of ones’ net worth to commit. Below is an example of what I view as a General in a portfolio allocation structure. I will have a deeper write up but most likely will put it behind a paywall. I will continue do more of these TL;DR summary writeup as part of the free availability but the ideas will not be my top ideas. TL;DR Summaries will be more of a window into my thinking of investments and geared toward lower quality investment ideas where I am neutral / slight bullish.