The task that was 2005 is finished, and it's time for copier king Xerox (NYSE:XRX) to hit stop. How did the year work out? Was the toner low on sales? Did the company print enough profits? We'll find out tomorrow, when the company reports its Q4 and full-year 2005 results.

Wall Street Wisdom:

  • General consensus. For such a large and well-known firm, Xerox doesn't get a whole lot of coverage on Wall Street. Only 10 analysts cover the firm, and seven of them label it with the unhelpful hold rating. The other three say buy.
  • Revenues. Why the lack of enthusiasm? Slow growth could be part of it. Analysts expect sales to grow a bare 2% when Xerox reports tomorrow.
  • Earnings. Profits, on the other hand, are believed to have grown strongly in Q4 -- up 33% over the year-ago period to $0.32.

Margin watch:
My fellow Fool, Tom Taulli, recently highlighted Xerox's "margin issues." Pressured by competitors such as Canon (NYSE:CAJ) and Hewlett-Packard (NYSE:HPQ), the company's selling price points have to give way; meanwhile, operating costs aren't being cut fast enough to make up the difference. The results can be seen below.

Marg.

6/04

9/04

12/04

3/05

6/05

9/05

Gross

41.2%

42.0%

40.6%

40.8%

40.2%

40.1%

Op.

9.8%

10.2%

10.0%

10.4%

9.9%

9.6%

Net

5.1%

5.4%

5.5%

5.2%

6.6%

5.9%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

Valuation metrics:
Xerox sports a price-to-free cash flow ratio of 10, which at first glance looks much better than the firm's P/E of 16. The problem is that Xerox also carries a boatload of debt, enough to jack its enterprise value-to-free cash flow ratio back up to 14. With 11% growth projected over the next five years, the price isn't super-expensive, but it's not yet a bargain.

Fool contributor Rich Smith does not own shares of any company named above.