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DXC – Market expectations are for Uniform ROA expansion, but management may have concerns about margins, business stability, and client relationships

April 13, 2021

  • DXC Technology Company (DXC:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 16.2x Uniform P/E. At these levels, the market has bearish expectations for the firm, but management may be concerned about margin expansion, business stability, and client relationships

  • Specifically, management may lack confidence in their ability to stabilize revenues, maintain their book-to-bill ratio, and effectively reduce costs without disrupting their business. Furthermore, they may have concerns about secular headwinds surrounding their ITO layer, the impact of runoffs and terminations on organic revenue growth, and the sale of their U.S. State and Local Health and Human Services business. Finally, management may lack confidence in their ability to expand margins, sustain positive business momentum, and further enhance and rebuild customer and partner relationships