Revenue has been on a secular decline.
New CEO deploys a credible go-forward strategy.
Revenue growth is the key indicator for the success of the go-forward strategy.
There are execution risks and some are beyond DXC’s control.
Low valuation reflects investors’ concern of the secular decline headwind.
DXC Technology (DXC) is facing significant headwind in the secular decline of roughly 73% of its business. While it is working to rapidly grow in other areas, the jury is still out if it can arrest its revenue decline. New management has put together a credible strategy, but there are high execution risks. DXC’s valuation is low, but it just reflects investors’ concern for the secular headwind. Two key things DXC investors should watch for: (1) if the rate of decline of 73% of the business is consistent with management’s assumption of a high single-digit decline rate, and (2) if management can achieve the aggressive growth rate of the rest of the business to achieve its revenue target. I investigated DXC’s business because of its low valuation, but have decided to not invest in DXC because of the secular headwind.