Seems the market was even more pessimistic on the Q2 numbers than this forum.
19 replies (most recent on top)
@4wns+1po14BfL Buffett would probably not invest himself. However I think he would acknowledge that the value investors who own this thing are indeed investing as opposed to specualting. Charley Munger said something interesting that reminded me alot of DXC.
"A business with something glorious underneath, disguised by terrible numbers that cause cut-off points in other people's minds, is ideal for us if we can figure it out." -Charley Munger
I'll get hate for this which is fine but I think this describes Luxoft and DXC's insurance buisness pretty well honestly. I've made the argument that DXC could be liquidated but honestly If DXC sold GIS tommorow they'd be left with a profitable growing buisness despite the challanging IT market. So one of the key questions here is can DXC keep growing GBS? Personally I think so but I know that's very controversial here.
Interesting reading. Lucky I sold my shares some years ago at over $100. $20 looks like an awful price to sell at now. Cigar butt or not, I wonder if Warren Buffet would invest.
@2erd+1po14BfL, where are you located?
Every day I read that morale s at rock bottom and every day I read how much. employee’s hate DXC.
It’s not rock bottom as these people stay, if you don’t like how you’re being treated then find a new job and leave already. This site should t have anyone b-tching as they al should have left.
I know I did in January and have 2 COL increases and another 3% coming this January
The company is no fool. They know people who've been here for years and accepted 0% pay rises since they joined will probably continue to do so. It's somewhat short sighted. Eventually those people will retire, and the knowledge will be lost. But the clients will just realise nobody's here to support them, and the perception it's being professionally managed was just that. The answer - buy a new system and spend a fortune upgrading. Just not with DXC! We're only here to baby sit end of life systems. We try and upgrade but don't have the processes and people to allow that to happen smoothly enough to make it viable to even start.
@1cjh+1po14BfL On the book to bill you're not wrong at all but I don't think it's overly concerning yet for a couple of reasons. Q1 and Q2 of last year had a book to bill of .87 and .83 respectively then in Q3 the book to bill jumped to 1.34 followed by 1.04 in Q4 and they ended the year up on book to bill. If you look at DXC's history book to bill tends to be stronger in the 2nd half of the year. So far this year we've had a book to bill of .89 and .81 which is basically the same as last. So we'll see what happens in q3 and q4 but I suspect that the book to bill will catch back up and even if it doesn't I'd be ok with a slight drop given the really weak IT services market right now.
@1ajg+1po14BfL I think the $10 Billion Enterprise value is overly pessimistic if your assuming a longterm liquidation especially when DXC has demonstrated an ability to sell assets above book value for cash. I get that you think the free cash flow is going to decline but the key question here is over what period of time? It's increased from 700 Million to 800 Million yoy and in FY 2022 they had something like a $1.5 Billion reversal. I'd be perfectly happy if they did $500 million for the next 5 years but probably it will be higher than that since revenue is declining by roughly 5% annually.
Cash flow is good in comparison to the market capitalisation.
The fact which should bother all is the drop in book to bill.
This shows the ability generate future revenue. The outlook here is misrable.
The whole company is valued just under $10B.
$4.6 market Value plus $4.2B debt so debt is nearly same as capitalization, not a good place to be in high rates. A poor balance sheet.
The trajectory of the company is downwards for several years, and the future orders are also trending downwards.
The $800m Fcf will not be maintained as there are only so much of buildings you can sell and employees you can lay off and sc--w. This is before further macro downturn, Sally said 2 quarters ago on a conference call that it didn't effect DXC but has subsequently changed his mind (don't believe a word of what he says), beware of faster revenue declines and target misses ahead.
Customers are leaving DXC, and the market uptick you are seeing is a general short term rally as all stocks have been marked higher.
The share buyback is temporarily manipulating the EPS for Sallys own gains, he should be paying debt not BBS to bolster the balance sheet, be warned this is not a value or growth stock, its a value trap.
"cigar butt" - just another form of vulture capitalism.
The vulture players are always circling the market, looking for a fast buck.
There are broadly two investment strategies - invest to grow a company, invest to crash a company (and profit from the flip side)
These two different approaches can both be active at the same time with different investors playing different games, both counter to each other.
The one thing I'm always conscious of though is that wall street is largely disconnected from the actual workings of any particular company. They don't understand or want to understand exactly how any business works - they don't care, its just about the numbers on their screen, which are largely based on the machinations of stock trading data rather than anything real.
Sadly the losers are always the people not on wall street - the employees, the customers, the suppliers, the small investors and even the pensioners.
The "clever" wall street gang and the company's board never lose.
@ucq+1po14BfL Thats the thing though if they build up more cash than the current market cap in the next 3 to 5 years they can sell all the assets, pay off the debt and investors will be left with a pile of cash that can be distributed to them. Warren Buffett calls this type of stock a Cigar Butt because its equavilent to picking up the butt of a cigar thrown on the floor and getting one last puff out of it. Disgusting but it also serves its purpose. If the revenue never grows this is what I see DXC turning into. It su-ks for the employees and I won't comment on the morality but again it's a legitimate way to make money.
Short term (1-2 years) DXC is not going out of business and while it remains cash flow positive and spending (wasting) its profits on share buybacks its a relatively safe investment for shareholders. Its not a viable long term strategy but when has Wall St ever paid any attention beyond the next quarter or two? There is no investment for growth, and as the revenue shrinks below $10B/year it will get more difficult to stay cash flow positive to the same degree, but that's a 3-5 year story.
@Servant leader I'm not sure I would go that far. DXC has been a hard place to work especially in EMEA and the culture has a very long way to go. I think most people on here have legitimate complaints which is why I still read this board every so often. But as hard as this is to hear that doesn't really make DXC a bad investment by default.
@cej+1po14BfL - Very well written. Half of the guys writing bad about the company all the time, without having any knowledge are losers. We have so many of them and they are being sent home one at a time. It does take and it is work in progress. Either you are with us or you are against us. Period.
@mvf+1po14BfL I don't know where your getting the lack of confidence in the free cash flow number they reaffirmed it multiple times on the call. But just for arguments sake let's cut it in half and say it was only $400 Million. That's still a 10% return you can't get that anywhere right now. It's more than likely going to be much closer to the 800 Million if they miss at all. On the low book to bill point I the exact same thing happened in Q1 & Q2 of last year but Q3 made up the gap with a book to bill of 1.35. On your market cap point that why I also mention share holder equity of $3 Billion if the buisness where to be liquidated to day and all the debts settled an investor would only take a 25% haircut. But again DXC is profitable has good liquidity and generating good free cash flow so long as they maintain this then there's really no bankubtcy concern and they can just pile up cash. Also FYI Zachs research is more or less just summarizing the finacial results there. It reads very much like an AI wrote the article with some minor human editing. Actual research would be talking to DXC customers, Employees and vendors.
It was a sh-t set of results. The 19th consecutive fall in turnover and more to come.
The only reason for the share price rise,was Powell and the fed holding rates which gave the market a lift up.
The CFO wasn't confident in his answers on FCF so don't bank on that $800M figure.
They were talking about contract run offs and that's 4 years since Salvino said he had sorted that.
His not winning business as can be seen from the low book to bill. The company is shrinking fast not growing.
His using the employees pay raise monies to pay himself and his entourage, and to do buybacks.
Employee morale is rock bottom and this is a managed decline to the bottom.
The mcap is $4billion but there is also debt on top of that.
Read Zachs research to see no one is recommending this stock, be warned.
It's a bit dissmisive to just assume investors are crazy without looking at the finacials. The numbers really weren't that bad from the point of view of an investor. You guys need to realize DXC's market cap was only $4 billion before earnings and they paid something like $2 Billion for Luxoft. Luxoft has grown under DXC it alone probably justifies DXC's current valuation. Same thing with the insurance software buisness, comparable companies are currently valued at 5x DXC's market cap despite having similar sales to the insurance buisness alone. Both these buisnesses are growing at roughly 5% annually so the valuation should be rising not falling. They also reaffirmed that the free cash flow will be $800 Million this year and if they can hit that then they'll generate roughly 20% of the companies value in cash. The best way to think about this is in the context of a bond thats paying a 20% yeild. You may not get any growth but who cares? Add in the fact that they have about $5 Billion in liquid assets and $3 Billion in share holder equity and DXC was basically at a floor for its valuation. Even if the sales continue to fall at 3% - 5% annually it really doesn't matter because they're fairly profitable and they're going to pile up enough cash to protect the investor from the downside and drive a decent return. Everyone here is also ignoring the fact that the IT services market is weak right now so DXC showing stabilization and going into their seasonally stronger quarters is a big plus aswell. This is what the market see's and why the stock is up. Don't shoot the messenger.
Crazy investors - their $$ they wasting down the drain; in investing in a dead duck company
Likely even if share price dives or static Sal man will make further head count cuts, some share buy back runs before he and Steakcutter cash out more $ millions out of the DXC dead donkey that is DXC
Or analysts are betting on a new CEO, as the numbers are a bit weak.