Is DXC Technology considered undervalued or overvalued compared to similar companies in the industry?

Summary: What Really Drives DXC Technology's Valuation? Understanding how DXC Technology (DXC) stacks up against its peers isn’t just about reading a few ratios off Yahoo Finance. I’ve spent time analyzing earnings calls, digging into regulatory filings, and even chatting with a couple of industry analysts to get a real sense of whether DXC is undervalued, overvalued, or maybe just misunderstood. In this article, you’ll get a hands-on breakdown of how DXC’s valuation compares to similar IT services firms, what numbers actually matter, and how global standards and legal frameworks play into investor decision-making. Plus, I’ll share a couple of pitfalls I hit while trying to make sense of the data—and how you can avoid them. Why Should You Care About DXC's Valuation Versus Its Peers? Let’s set the stage: Say you’re considering putting money into DXC, or maybe you’re just curious about how Wall Street sees it. The big question—“Is DXC cheap or expensive compared to similar companies?”—isn’t as easy as it sounds. Sometimes a stock looks like a steal on paper, but there’s a hidden catch. Other times, it looks pricey, but there’s a reason behind the premium. I learned this the hard way during my first deep dive into IT services stocks, where I got tripped up by a couple of accounting quirks and region-specific rules. To really answer the valuation question, you need a blend of hands-on number crunching, regulatory context, and a bit of skepticism. Step-by-Step: How I Compared DXC to Its Peers Here’s my process, with all the messy bits included: Pick the Right Peers: I started with Accenture (ACN), Cognizant (CTSH), and Infosys (INFY). These are all global IT services players, listed in the US or internationally, and with comparable business models. Trust me, I almost threw IBM in, but their exposure to hardware muddied the waters. Gather Key Valuation Metrics: The usual suspects: Price/Earnings (P/E), Price/Sales (P/S), Enterprise Value/EBITDA (EV/EBITDA), and Free Cash Flow Yield. I used Morningstar and Yahoo Finance for the numbers. Adjust for Accounting Differences: Here’s where it got tricky. US GAAP and IFRS treat things like restructuring charges and goodwill differently. For instance, DXC’s heavy restructuring skews its earnings, while Infosys (reporting under IFRS) tends to have cleaner numbers. This isn’t just nitpicking—these differences can throw off P/E and EV/EBITDA comparisons. Check Regulatory Filings: I dug into DXC’s 10-K and Accenture’s annual report. This helped clarify one mistake I made: I initially missed that DXC’s EBITDA was adjusted for one-time charges, so their “cheap” valuation was a bit of an illusion. Sift Through Analyst Commentary: I reached out to a friend who works at a boutique research shop. Their take: “DXC’s discount is partly justified by execution risk and customer churn, but the market’s also been overly pessimistic.” If you want to see what the process looks like, here’s a quick screenshot from my own spreadsheet (real numbers as of Q2 2024): Notice how DXC’s EV/EBITDA ratio trails its peers, but its P/E is harder to interpret due to those pesky adjustments. Comparing "Verified Trade" Standards: Why Legal Context Matters Even if you’re just looking at financial ratios, legal and regulatory standards can profoundly affect a company’s reported numbers. Here’s a handy table summarizing how the US, EU, and India differ in their “verified trade” standards for IT services accounting and disclosure: Country/Region Standard Name Legal Basis Enforcement Agency United States US GAAP Securities Exchange Act of 1934 SEC European Union IFRS EU Regulation No 1606/2002 ESMA India Ind AS (Indian Accounting Standards) Companies Act, 2013 Ministry of Corporate Affairs These nuances mean that when you compare DXC (US-based) with Infosys (India-based), you’re not always looking at apples to apples. For example, restructuring costs that DXC must report could be classified differently under Indian standards. Case Study: When Peers Don't Line Up—DXC vs Infosys A classic example of regulatory friction: A few years ago, DXC was negotiating a partnership deal with an EU-based client. The client required revenue recognition according to IFRS, not GAAP. DXC’s initial proposal showed stronger revenue growth, but the client’s auditors flagged it because some of that growth was tied to multi-year contracts that GAAP allowed DXC to recognize upfront, while IFRS would have spread it out over the contract period. This led to weeks of back-and-forth, which I followed on industry forums (Wall Street Oasis thread), before both sides finally agreed on a compromise. If you ever wonder why two companies in the “same” business look so different on paper, this kind of scenario is usually the culprit. What the Experts Say (And Where I Got It Wrong) I sat in on a quarterly call with a portfolio manager from a US asset management firm, who put it bluntly: “DXC trades at a 30-40% discount to Accenture and Cognizant on both earnings and cash flow, but that’s partly because the market’s worried about DXC’s ability to keep clients and grow margins. If they show even modest improvement, that discount could close.” I’ll admit, my first time through the numbers, I thought DXC was a screaming buy. But after factoring in the customer churn issues and a couple of legal settlements (that I only found buried in the 10-K footnotes), I realized the market’s caution isn’t entirely irrational. Personal Experience: Spreadsheet Headaches and Lightbulb Moments I remember one late night, trying to reconcile DXC’s “adjusted EBITDA” with the reported figures from Infosys. I had this moment of frustration—why couldn’t they just report things the same way? But then, digging into the OECD’s guidelines on non-GAAP measures, I realized that each jurisdiction’s regulations are designed for local investor protection. It’s not about making my life easier (unfortunately). In the end, I built a model that normalized for the biggest differences, and the result? DXC looked undervalued, but not nearly as much as I thought at first glance. Conclusion: Is DXC Undervalued or Overvalued? Next Steps Based on actual data and my own missteps, here’s the bottom line: DXC does trade at a significant discount to its global peers on most valuation metrics. Some of that is justified by business challenges (like client retention and margin pressure), but some is likely an overreaction by the market. If you’re thinking about investing, don’t just stop at the headline ratios. Dig into the footnotes, understand the legal and regulatory context, and maybe even build your own normalized model. Next step: For anyone serious about comparing DXC to its peers, I recommend pulling down the latest annual reports, reading through the non-GAAP reconciliations, and checking out commentary from the U.S. Trade Representative and WTO on cross-border disclosure standards, as these often trickle down into company accounting policies. If you hit a wall or notice something odd in the numbers, don’t feel bad—I’ve been there. Sometimes, the real story isn’t in the ratios, but in the footnotes and fine print.

Mavis's answer to: How does DXC's valuation compare to its peers?

Summary: What Really Drives DXC Technology's Valuation?

Understanding how DXC Technology (DXC) stacks up against its peers isn’t just about reading a few ratios off Yahoo Finance. I’ve spent time analyzing earnings calls, digging into regulatory filings, and even chatting with a couple of industry analysts to get a real sense of whether DXC is undervalued, overvalued, or maybe just misunderstood. In this article, you’ll get a hands-on breakdown of how DXC’s valuation compares to similar IT services firms, what numbers actually matter, and how global standards and legal frameworks play into investor decision-making. Plus, I’ll share a couple of pitfalls I hit while trying to make sense of the data—and how you can avoid them.

Why Should You Care About DXC's Valuation Versus Its Peers?

Let’s set the stage: Say you’re considering putting money into DXC, or maybe you’re just curious about how Wall Street sees it. The big question—“Is DXC cheap or expensive compared to similar companies?”—isn’t as easy as it sounds. Sometimes a stock looks like a steal on paper, but there’s a hidden catch. Other times, it looks pricey, but there’s a reason behind the premium. I learned this the hard way during my first deep dive into IT services stocks, where I got tripped up by a couple of accounting quirks and region-specific rules. To really answer the valuation question, you need a blend of hands-on number crunching, regulatory context, and a bit of skepticism.

Step-by-Step: How I Compared DXC to Its Peers

Here’s my process, with all the messy bits included:

Pick the Right Peers: I started with Accenture (ACN), Cognizant (CTSH), and Infosys (INFY). These are all global IT services players, listed in the US or internationally, and with comparable business models. Trust me, I almost threw IBM in, but their exposure to hardware muddied the waters.
Gather Key Valuation Metrics: The usual suspects: Price/Earnings (P/E), Price/Sales (P/S), Enterprise Value/EBITDA (EV/EBITDA), and Free Cash Flow Yield. I used Morningstar and Yahoo Finance for the numbers.
Adjust for Accounting Differences: Here’s where it got tricky. US GAAP and IFRS treat things like restructuring charges and goodwill differently. For instance, DXC’s heavy restructuring skews its earnings, while Infosys (reporting under IFRS) tends to have cleaner numbers. This isn’t just nitpicking—these differences can throw off P/E and EV/EBITDA comparisons.
Check Regulatory Filings: I dug into DXC’s 10-K and Accenture’s annual report. This helped clarify one mistake I made: I initially missed that DXC’s EBITDA was adjusted for one-time charges, so their “cheap” valuation was a bit of an illusion.
Sift Through Analyst Commentary: I reached out to a friend who works at a boutique research shop. Their take: “DXC’s discount is partly justified by execution risk and customer churn, but the market’s also been overly pessimistic.”

If you want to see what the process looks like, here’s a quick screenshot from my own spreadsheet (real numbers as of Q2 2024):

DXC Peer Valuation Comparison Spreadsheet

Notice how DXC’s EV/EBITDA ratio trails its peers, but its P/E is harder to interpret due to those pesky adjustments.

Comparing "Verified Trade" Standards: Why Legal Context Matters

Even if you’re just looking at financial ratios, legal and regulatory standards can profoundly affect a company’s reported numbers. Here’s a handy table summarizing how the US, EU, and India differ in their “verified trade” standards for IT services accounting and disclosure:

Country/Region	Standard Name	Legal Basis	Enforcement Agency
United States	US GAAP	Securities Exchange Act of 1934	SEC
European Union	IFRS	EU Regulation No 1606/2002	ESMA
India	Ind AS (Indian Accounting Standards)	Companies Act, 2013	Ministry of Corporate Affairs

These nuances mean that when you compare DXC (US-based) with Infosys (India-based), you’re not always looking at apples to apples. For example, restructuring costs that DXC must report could be classified differently under Indian standards.

Case Study: When Peers Don't Line Up—DXC vs Infosys

A classic example of regulatory friction: A few years ago, DXC was negotiating a partnership deal with an EU-based client. The client required revenue recognition according to IFRS, not GAAP. DXC’s initial proposal showed stronger revenue growth, but the client’s auditors flagged it because some of that growth was tied to multi-year contracts that GAAP allowed DXC to recognize upfront, while IFRS would have spread it out over the contract period. This led to weeks of back-and-forth, which I followed on industry forums (Wall Street Oasis thread), before both sides finally agreed on a compromise.

If you ever wonder why two companies in the “same” business look so different on paper, this kind of scenario is usually the culprit.

What the Experts Say (And Where I Got It Wrong)

I sat in on a quarterly call with a portfolio manager from a US asset management firm, who put it bluntly: “DXC trades at a 30-40% discount to Accenture and Cognizant on both earnings and cash flow, but that’s partly because the market’s worried about DXC’s ability to keep clients and grow margins. If they show even modest improvement, that discount could close.”

I’ll admit, my first time through the numbers, I thought DXC was a screaming buy. But after factoring in the customer churn issues and a couple of legal settlements (that I only found buried in the 10-K footnotes), I realized the market’s caution isn’t entirely irrational.

Personal Experience: Spreadsheet Headaches and Lightbulb Moments

I remember one late night, trying to reconcile DXC’s “adjusted EBITDA” with the reported figures from Infosys. I had this moment of frustration—why couldn’t they just report things the same way? But then, digging into the OECD’s guidelines on non-GAAP measures, I realized that each jurisdiction’s regulations are designed for local investor protection. It’s not about making my life easier (unfortunately).

In the end, I built a model that normalized for the biggest differences, and the result? DXC looked undervalued, but not nearly as much as I thought at first glance.

Conclusion: Is DXC Undervalued or Overvalued? Next Steps

Based on actual data and my own missteps, here’s the bottom line: DXC does trade at a significant discount to its global peers on most valuation metrics. Some of that is justified by business challenges (like client retention and margin pressure), but some is likely an overreaction by the market. If you’re thinking about investing, don’t just stop at the headline ratios. Dig into the footnotes, understand the legal and regulatory context, and maybe even build your own normalized model.

Next step: For anyone serious about comparing DXC to its peers, I recommend pulling down the latest annual reports, reading through the non-GAAP reconciliations, and checking out commentary from the U.S. Trade Representative and WTO on cross-border disclosure standards, as these often trickle down into company accounting policies.

If you hit a wall or notice something odd in the numbers, don’t feel bad—I’ve been there. Sometimes, the real story isn’t in the ratios, but in the footnotes and fine print.