10-Minute Investment Autopsy No. 22: DXC Technology (DXC)
A 13% free cash flow yield and a CEO with a great track record. The stock still lost 86% of its value
If you haven’t read the guide to the 10-Minute Investment Autopsy series, you can find it here.
The Original Thesis
Who: Alexander Roepers
When: January 2019
What: DXC Technology (ticker: DXC)
The Thesis:
DXC was formed in April 2017 when Computer Sciences Corp merged with the enterprise services arm of Hewlett Packard Enterprise.
CEO, Mike Lawrie, has an excellent track record with proven shareholder orientation
Alexander believes the CEO is doing the right things operationally
Management has flexibility to return the company to growth
The stock trades at a 13% FCF yield based on Alexander’s 2020 estimates, leaving plenty of upside with good execution
These are the highlights of DXC’s then-recent financials up to the point when Alexander was presenting his thesis:
This is the stock chart up to the time when Alexander presented his thesis:
Pause here. Think through the thesis and the facts and decide what you agree with, what you disagree with and whether you would invest based on the information available.
What Happened (Just the Facts)
Between January 2019 and now DXC shareholders saw a -86% total return compared to +211% for the S&P 500
There is a lot more to the case:
The Autopsy - the reasons for what happened
The Lessons that you can apply to your own investing
Discussion Questions for you to think about and discuss with other thoughtful investors in the weekly case thread