From time to time, information technology (IT) professional services company Computer Sciences
The company got its start in 1958, when there were only about 4,000 computers worldwide. However, management realized there would be huge demand for software applications.
Over the years, CSC has developed IT systems for the U.S. Atomic Energy Commission, the Internal Revenue Service, the Federal Aviation Administration, and NASA. There were also billion-dollar contracts with General Dynamics
However, this is basically a slow-growth company. In the prior earnings report, management forecast revenue growth of just 2% to 3% for the full year and earnings are expected to range from $3.71 to $3.81 per share.
No doubt, the National Health Service contract is a big win in which CSC will help build a sophisticated patient record system. Interestingly enough, it is taking over this project from Accenture
In other words, there is definitely risk with these mega contracts for IT companies. And though the dollar signs may be big, most of these contracts are long-term. In the case of the National Health Service contract, the term is nine years -- so the revenues will be spread over time.
While CSC has a great track record, there are certainly risks. In fact, as IT consulting companies outsource overseas, the risks may grow even higher, especially in terms of controlling quality. So, given the slow growth of CSC -- and the difficulty of landing megacontracts -- it's hard to find the company's stock attractive.