Computer Sciences Corporation (CSC): Deep Value Investors Will Love This Stock

Page 1 of 2

Computer Sciences Corporation (NYSE:CSC)has long been a favorite holding of David Einhorn, whose confidence in the company’s turnaround is starting to pay off. Already having doubled in market price since Einhorn’s investment, the company still trades for just 7.5 times trailing earnings.

Computer Sciences Corporation (NYSE:CSC)

Meanwhile, Computer Sciences continues its efforts to boost margins, which have only recently recovered to the level experienced before the company took a big bath in 2012.

In fact, the company is already exceeding Einhorn’s expectations; the activist investor stated at the time of his purchase that he expected the company to eventually earn $4 to $5 per share. Over the last four quarters, the company earned over $6 per share. If the company can maintain this level of profitability, the stock — now trading at around $45 per share — is a bargain.

No moat, but a decent business

Computer Sciences Corporation (NYSE:CSC) does not have a durable competitive advantage that will enable it to earn outsized profits for decades into the future. However, the company currently has a significant advantage in expertise and IP in its core markets, in addition to a long history of good relations with government customers. Although the company’s reliance on government spending could sink the company if austerity measures are imposed by Congress, such a scenario is unlikely to occur in the near future.

Instead, Computer Sciences’ main obstacle comes in the form of Cognizant Technology Solutions Corp (NASDAQ:CTSH) and other competitors. Although Cognizant is not as reliant on government contracts as Computer Sciences — Cognizant is focused on growth in Western Europe — it poaches more than its fair share of highly-trained employees from Computer Sciences. As the battle for qualified employees intensifies, Computer Sciences Corporation (NYSE:CSC) and Cognizant will continue to grow their backlogs and employee salaries will continue to rise.

However, Cognizant’s raid on employees is not likely to come to an end any time soon. As a latecomer to the fast-growing European market, the company has some catching up to do; it is aggressively expanding in the region. In addition, the company is also having trouble filling employment vacancies in its U.S. business; the company relies on American personnel to recruit and retain American customers. These personnel concerns make a long battle for employees a likely scenario.

Despite Computer Sciences’ deep relationships with U.S. state and federal governments, the company earns significantly lower returns on invested capital than Cognizant.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

The 50 Best Personal Finance Blogs

Most Expensive Apartments in New York City

Bloodiest UFC Fights Ever Fought

Most Expensive Rum Brands in the World

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!