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Computer Science Corp (NYSE:CSC) popped up this weekend on one of our screens at Alert HQ Premium. It was on the short list of stocks that had just raised their dividend and that showed value stock characteristics.

CSC just increased their dividend by 33%, going from $0.60 to $0.80. The valuation measures are quite attractive: trailing PE less than 10, PEG = 1.12, Price to Sales less than 0.5, Enterprise Value/EBITDA less than 4.

Better things on the way?

First, the technical picture. CSC appears to be in the process of breaking out. It has pushed above its 200-day moving average. In addition, its 50-DMA has achieved a bullish crossover above the 200-DMA though, truth be told, by only one penny. The chart below shows the situation. Another half a buck and the stock will be breaking above the previous recent high. That higher high would be a confirmation of a bullish trend..

Looking back at the company's financials over the course of the last year, the results have not shown accelerating earnings or revenues. On the contrary, sales and earnings have been stuck in a narrow range.

Is it possible that CSC is turning the corner? Can some of the company's latest initiatives finally begin to yield results? Will the company start to show better results in some of its traditionally strong segments?

As background, CSC provides consulting, systems integration and design, IT and business process outsourcing, applications software, web and application hosting to its clients in industry and government domestically and internationally. All things being equal, an improving economy should translate into growth in all these sectors. With legislators tightening the purse strings, however, government clients may not be as plentiful as the company would normally expect despite CSC's contention that improved IT efficiencies will increase productivity and reduce costs for governments.

What is interesting is that the company is pushing into some newer areas that have the potential to pick up the slack. The company is now touting its capabilities in the following currently hot areas:

  • cloud computing
  • health care billing systems and electronic records management
  • cyber-security

None of these initiatives will yield overnight success but, given that these areas are where industry attention is focused, they should allow CSC to position themselves for improved future growth. In the meantime, company management has increased expected earnings for 2010 by $0.05.

In summary, the story on this stock is future potential while the downside is limited by its reasonable value characteristics. CSC seems like another good candidate for your watch list.

Disclosure: No position at time of writiing

Source: Computer Science Corp: On the Verge of Better Things?