Valuation and Growth
At 17.6 times forward earnings, I actually think that Computer Sciences Corporation (NYSE:CSC) is cheap when considering its growth projections and very strong balance sheet. When the company announces fiscal year 2013’s earnings next Wednesday, they are expected to report $2.75 per share. The analysts’ consensus calls for this to rise to $3.49 and $4.09 in 2014 and 2015, respectively, for earnings growth of 27% and 17.2%, respectively. What’s more is that the company has a positive net cash (cash minus debt) position, which is one of my favorite things to see in a prospective long-term investment. In fact, as a result of good management, the company’s net cash position has consistently improved over the recent years.
The Bottom Line
When it comes to investing in these computer services companies, I’d say you either have to go mid-size or large. The little guys just have too many entry barriers to be competitive in this business. While IBM is a rock-solid company whose earnings are growing at a more-than-respectable pace, Computer Sciences Corporation (NYSE:CSC) does look like the more exciting play here. If you have a bit more risk tolerance, forward earnings growth of over 20%, a great balance sheet, and a decent dividend yield (1.7%) are a pretty enticing combination.
The article The Best Choice In Computer Services originally appeared on Fool.com and is written by Matthew Frankel.
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