Xerox Holdings Stock Is Believed To Be Fairly Valued
In This Article:
- By GF Value
The stock of Xerox Holdings (NYSE:XRX, 30-year Financials) shows every sign of being fairly valued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $23.87 per share and the market cap of $4.6 billion, Xerox Holdings stock appears to be fairly valued. GF Value for Xerox Holdings is shown in the chart below.
Because Xerox Holdings is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
Link: These companies may deliever higher future returns at reduced risk.
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. Xerox Holdings has a cash-to-debt ratio of 0.55, which is worse than 79% of the companies in Software industry. GuruFocus ranks the overall financial strength of Xerox Holdings at 5 out of 10, which indicates that the financial strength of Xerox Holdings is fair. This is the debt and cash of Xerox Holdings over the past years:
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. Xerox Holdings has been profitable 9 years over the past 10 years. During the past 12 months, the company had revenues of $6.9 billion and earnings of $1.06 a share. Its operating margin of 6.04% in the middle range of the companies in Software industry. Overall, GuruFocus ranks Xerox Holdings's profitability as fair. This is the revenue and net income of Xerox Holdings over the past years:
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Xerox Holdings is -5.2%, which ranks worse than 77% of the companies in Software industry. The 3-year average EBITDA growth is -9.6%, which ranks worse than 78% of the companies in Software industry.