Computer Sciences Corporation (CSC) And Billionaire David Einhorn’s Investor Letter

A number of Computer Sciences’ peers have also been struggling, but not Cognizant Technology Solutions Corp (NASDAQ:CTSH) , another IT consulting firm that is a leader when it comes to offshore activities. Cognizant plans to tap new geographic markets that include Europe, Asia Pacific, Latin America, and the Middle East. The tech company has also been expanding its footprint in China, where it sees the market as being the next big market for outsourced offshore IT infrastructure.

Infosys Ltd ADR (NYSE:INFY) has lagged its top peer Cognizant when it comes to performance. Over the past twelve months Infosys is down around 8%, where Cognizant is up 7%. This is due in large part to Cognizant’s larger exposure to the higher growth consulting markets of financial services and healthcare. Infosys did manage to see double digit growth in its consulting and systems integration segment per last quarter’s earnings announcement.

Syntroleum Corp (NASDAQ:SYNT) is another competitor that has been performing well of late, having beat analysts’ estimates by at least 20% over the last four quarters. However, the string of solid performance might not continue, where the company has lowered full year 2012 EPS guidance three times in the last six months, and fiscal year 2013 EPS is expected to come in flat relative to 2012.

One of the biggest players in the global IT consulting industry is International Business Machines Corp. (NYSE:IBM), which gets around 20% of its revenue from global services and consulting. The tech giant is focused on enterprise markets, which includes a focus on support for analytics and cloud computing. IBM is a leader in the application infrastructure market and should remain so; Garnter estimates that IBM owns 32% of the middleware market, with Oracle at in second at only 17%.

Don’t be fooled. Computer Sciences trades at an elevated P/E after beating expectations handedly over the past two quarters. However, in looking at the stock’s price to sales multiple, Computer Sciences trades well below its peers:

Price to Sales
Computer Sciences 0.47
Cognizant Technology 3.02
Syntel 3.25
IBM 1.93
Infosys 3.90

The stock also appears to be executing its turnaround and restructuring plan nicely. Earnings results earlier this month showed that quarterly revenue was up year over year, and the company boosted 2013 guidance; saying that earnings will come in better than expected thanks to profit margin expansion due to cost cutting improvements. If Computer Sciences manages to reach Einhorn’s predicted $4 per share of earnings, and assuming it trades at a P/E multiple of 17 (which is the average of its peers) the upside is nearly 50% from its current trading price of around $46. To boot the stock pays a 1.7% dividend yield.

The article Computer Sciences And Billionaire David Einhorn’s Investor Letter originally appeared on Fool.com and is written by Marshall Hargrave.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 44 percentage points in 21 months Learn how!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!