Dj Dxc Technology Corporate Stock Underperforms Tuesday When Compared To Competitors Despite Daily Gains

DXC Technology Company. (DXC) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.

The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this company, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. This insight is at the core of our stock rating tool -- the Zacks Rank.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For DXC Technology, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.

Current-Quarter Estimate Revisions

For the current quarter, the company is expected to earn $0.72 per share, which is a change of -17.24% from the year-ago reported number.

Over the last 30 days, one estimate has moved higher for DXC Technology compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 19.31%.

Current-Year Estimate Revisions

The company is expected to earn $3.09 per share for the full year, which represents a change of -1.28% from the prior-year number.

In terms of estimate revisions, the trend for the current year also appears quite encouraging for DXC Technology. Over the past month, five estimates have moved higher compared to one negative revision, helping the consensus estimate increase 10.25%.

Favorable Zacks Rank

Thanks to promising estimate revisions, DXC Technology currently carries a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

DXC Technology shares have added 13.2% over the past four weeks, suggesting that investors are betting on its impressive estimate revisions. So, you may consider adding it to your portfolio right away to benefit from its earnings growth prospects.

Zacks Investment Research

Investors looking for stocks in the Computers - IT Services sector might want to consider either DXC Technology Company. (DXC) or Dynatrace (DT). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

DXC Technology Company. and Dynatrace are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that DXC is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

DXC currently has a forward P/E ratio of 7.38, while DT has a forward P/E of 41.66. We also note that DXC has a PEG ratio of 1.86. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. DT currently has a PEG ratio of 4.14.

Another notable valuation metric for DXC is its P/B ratio of 1.27. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, DT has a P/B of 7.43.

Based on these metrics and many more, DXC holds a Value grade of A, while DT has a Value grade of F.

DXC sticks out from DT in both our Zacks Rank and Style Scores models, so value investors will likely feel that DXC is the better option right now.

Zacks Investment Research

Momentum investing is essentially an exception to the idea of "buying low and selling high." Investors following this style of investing are usually not interested in betting on cheap stocks and waiting long for them to recover. Instead, they believe that "buying high and selling higher" is the way to make far more money in lesser time.

Who doesn't like betting on fast-moving trending stocks? But determining the right entry point isn't easy. Often, these stocks lose momentum once their valuation moves ahead of their future growth potential. In such a situation, investors find themselves loaded up on expensive shares with limited to no upside or even a downside. So, going all-in on momentum could be risky at times.

It could be safer to invest in bargain stocks that have been witnessing price momentum recently. While the Zacks Momentum Style Score (part of the Zacks Style Scores system), which pays close attention to trends in a stock's price or earnings, is pretty useful in identifying great momentum stocks, our 'Fast-Paced Momentum at a Bargain' screen comes handy in spotting fast-moving stocks that are still attractively priced.

There are several stocks that currently pass through the screen and DXC Technology Company. (DXC) is one of them. Here are the key reasons why this stock is a great candidate.

Investors' growing interest in a stock is reflected in its recent price increase. A price change of 13.2% over the past four weeks positions the stock of this company well in this regard.

While any stock can see a spike in price for a short period, it takes a real momentum player to deliver positive returns for a longer time frame. DXC meets this criterion too, as the stock gained 14.9% over the past 12 weeks.

Moreover, the momentum for DXC is fast paced, as the stock currently has a beta of 1.67. This indicates that the stock moves 67% higher than the market in either direction.

Given this price performance, it is no surprise that DXC has a Momentum Score of A, which indicates that this is the right time to enter the stock to take advantage of the momentum with the highest probability of success.

In addition to a favorable Momentum Score, an upward trend in earnings estimate revisions has helped DXC earn a Zacks Rank #2 (Buy). Our research shows that the momentum-effect is quite strong among Zacks Rank #1 and #2 stocks. That's because as covering analysts raise their earnings estimates for a stock, more and more investors take an interest in it, helping its price race to keep up. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here

Most importantly, despite possessing fast-paced momentum features, DXC is trading at a reasonable valuation. In terms of Price-to-Sales ratio, which is considered as one of the best valuation metrics, the stock looks quite cheap now. DXC is currently trading at 0.31 times its sales. In other words, investors need to pay only 31 cents for each dollar of sales.

So, DXC appears to have plenty of room to run, and that too at a fast pace.

In addition to DXC, there are several other stocks that currently pass through our 'Fast-Paced Momentum at a Bargain' screen. You may consider investing in them and start looking for the newest stocks that fit these criteria.

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Zacks Investment Research