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Computer Sciences Corporation A Great Value Bet

|Includes: DXC Technology (DXC)

Computer Sciences Corporation (Ticker:CSC) a global IT services company operating in 90 countries has been able to sustain revenues of $16 billion despite the economic slowdown for the past 3 years. Strong cash flows in these past 3 years have resulted in investments in technology, new acquisitions and reduction in debt. CSC's balance sheet continues to show strength and the financial ratios continue to improve.

Going forward the following will be the key growth drivers for the company:

1. Cloud computing: The company has won significant cloud engagements with Amp, Tryg and State of California.

2. Health care: The company has won multiple public-sector healthcare contracts and continued to deliver health information systems projects for the governments of the UK, Denmark, the Netherlands and the State of New York.

3. Cyber security : Significant wins in this area has been of an important engagement with the U.S. Air Force to provide cyber security to the 24th Air Force Cyber Command

4. Financial Services: New contracts with UbS and CSC rISKmASter® claims management software and Celeriti™ banking and cards management software will continue to drive growth.

Value Parameters:

1. Price / Avg Free Cash flow stands at an astonishing 2.55 which means you could theoretically buy the company and break even in 3 years.

2. The current P/S ratio stands at a 0.37 compared to a 5 year historical high of 1.15

3. The stock meets David Dreman's contrarian investment strategy. His strategy involves picking stocks which have P/E of less than 10, P/B of less than 3 and Price/FreeCashFlow of less than 15

4. The stock also meets Geraldine Weiss Investment strategy, wherein the dividend yield is at a 5 year high

Technical Parameters:

The stock has been trading below its 30 day moving average. This gives investors a great price at which they can start accumulating. The stock has also seen a spurt in buying with volumes crossing 5 times its average volume in the recent past.

Given the above factors, we feel Computer Sciences Corporation (Ticker:CSC ) is a great value bet at current price of $28-30 and has the potential to appreciate by 30-40% in the medium to long term.