This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Xerox Is the Biggest Secret in Value Stocks as It Moves Beyond Copiers

NEW YORK (TheStreet) -- One of the best-kept secrets in value stocks is one of the best-known names in business.

Xerox (XRX - Get Report) is a surprising value stock that has moved far beyond copiers into information technology and document management. But it is still being priced like a copier stock.

And that will provide savvy investors with a great investing opportunity.

Here's what Xerox is doing now: On Tuesday it won the $500 million contract to run New York's Medicaid management system, one of the biggest in the U.S. A spokesman for the New York Health Department confirmed it. IBM beat out Hewlett-Packard (HPQ). The deal still has to be approved by the New York state comptroller.

Some copier company.

Xerox is an iconic brand name with a relatively small $14.3 billion market cap. At the Thursday close of $12.30, shares are up nearly 2% for the year to date but nearly 38% for the past 52 weeks. The stock has an unusually low forward PE ratio of slightly more than 10. The company's ratio of its enterprise value to earnings before interest, taxes, depreciation and amortization (EV/Ebitda) is less than 7, according to FactSet.

In other words, Xerox is being priced like a printer company such as Canon (CAJ) even though the majority of Xerox's revenue comes from its information technology and other outsourcing services.

This disparity results in XRX shares being priced low enough to attract a takeover offer from a larger competitor like Hewlett-Packard, with its total cash of over $15 billion and a market cap of nearly $63.6 billion.

Here is a one-year chart of Xerox's stock.

XRX Chart
data by YCharts

The chart reminds us that although the stock is up a fraction for the year to date it has skyrocketed over 40% since June 2013. At the end of the first quarter of 2014 the company had trailing 12-month free cash flow of $2.35 billion and operating cash flow of about $2.75 billion.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
XRX $9.47 0.00%
AAPL $95.18 0.00%
FB $117.43 0.00%
GOOG $692.36 0.00%
TSLA $232.32 0.00%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs