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Why Computer Sciences Corporation Rose 19.4% in March

By Anders Bylund - Apr 6, 2016 at 11:00AM

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A rising tide lifts all boats, including ones that might belong a bit further down.

Image source: CSC.

What: Shares of Computer Sciences Corporation ( CSC ) gained 19.4% in March 2016, according to data from S&P Global Market Intelligence. The rise started early on, as the technology services specialist closed a small acquisition in Australia. But the biggest boost fell near the end of March on heavy volume -- despite a lack of game-changing news.

So what: Computer Sciences is no penny stock, but the shares tend to be extremely volatile anyhow. The stock sports a beta value of 1.3, meaning that the chart often tracks the trends of the general market -- but typically swings 30% wider in either direction.

It's not like Computer Sciences sat on its hands in March. The company announced a couple of new large-scale customers and partnerships. The company also benefited from general strength in the IT consulting market, which saw both IBM ( IBM 0.53% ) and Cognizant ( CTSH 1.26% ) post double-digit gains. March was a good month to be in the business of helping enterprise customers set up and manage their data collection and analysis operations.

But again, there was no magic spark to propel this particular stock higher in March. A rising tide lifted many boats, and Computer Sciences didn't do anything crazy to miss out on that sector boost.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

Now what: The story changes a little bit if you used to own Computer Sciences before its government consulting operations were split off into a stand-alone business. Holding both stocks in tandem, as if never having sold the new CSRA ( CSRA ) shares that were issued in November, would have worked out to a smaller 11.5% gain in March.

There is nothing wrong with owning the slimmed-down version of Computer Sciences, but it's also not obvious that it's a best-in-breed company. CSC's profit margins look skimpy next to IBM's or Cognizant's. The best reason to hold Computer Sciences today is its attractive PEG ratio, which paints the stock as affordable in relation to its estimated earnings growth prospects.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

DXC Technology Stock Quote
DXC Technology
CSC
International Business Machines Corporation Stock Quote
International Business Machines Corporation
IBM
$117.72 (0.53%) $0.62
Cognizant Technology Solutions Corporation Stock Quote
Cognizant Technology Solutions Corporation
CTSH
$78.96 (1.26%) $0.98
CSRA Inc. Stock Quote
CSRA Inc.
CSRA

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