Please ensure Javascript is enabled for purposes of website accessibility

Why DXC Technology Stock Fell 29.3% in 2019

By Anders Bylund - Jan 9, 2020 at 4:17PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The IT services company's financial results continued to slide all year long, triggering a large asset sale near the end. That might still not be enough in the long run.

What happened

Shares of DXC Technology (DXC -0.14%) fell 29.3% in 2019, according to data from S&P Global Market Intelligence. The IT services company, which was born in 2017 from the merger of Computer Sciences Corporation and the enterprise services division of Hewlett Packard Enterprise, saw revenue and earnings fall all year long. And that's just the beginning of DXC's troubles.

DXC Revenue (TTM) Chart

DXC Revenue (TTM) data by YCharts.

So what

The chart above shows everything you need to know about DXC's financial performance over the last six quarters. Trailing revenue fell 7.3% over this period while earnings per share plunged 44%. DXC's stock lost 55% of its value over the same time frame. The first-quarter report in August triggered the sharpest single-day drop along the way, based on in-line results but a weak slate of next-quarter guidance targets.

The company completed its search for a new CEO in September, but the replacement was widely regarded as a downgrade and DXC's stock only fell faster on the news. DXC is now looking for buyers of several underperforming divisions that currently represent roughly 25% of its total revenue.

Two young businesspeople shrug in confusion at the contents of an unseen computer screen.

Image source: Getty Images.

Now what

The asset sale was announced in November and investors were quick to embrace that idea. DXC's share prices surged 35% higher that month, even though the announcement was paired with cuts to the company's full-year guidance. Analysts called it a "reset" of Wall Street's short-term expectations, which sounds like a good thing.

But even that huge jump left DXC's shareholders with a 29% loss in 2019 as a whole and even larger drops if you look further back. The stock is still priced for absolute disaster at 6.1 times forward earnings and five times trailing free cash flow. That's not a pessimistic view, but a realistic one. Asset sales may tap the brakes on this long-term decline, but I'm still not convinced that DXC belongs on any serious investor's list of great ideas today.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

DXC Technology Stock Quote
DXC Technology
$29.60 (-0.14%) $0.04

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/20/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.