Computer Sciences (CSC) , one of the largest global IT consultants,is trading well below its historical average valuation.

Shares are up more than 4% on the week, closing Tuesday at $51.60, up 88 cents, after the stock was upgraded Monday. Prudential analyst Bryan Keane boosted his firm's rating from neutral to overweight, just the third buy rating out of 13 analysts tracked by Bloomberg.

At current levels, the stock is down 15% from its April highs, when management put the company up for sale. Computer Sciences canceled those plans June 30, but also said it would use its excess cash flow to execute a $1 billion share-repurchase program over time.

Computer Sciences trades at just 13.9 times expected fiscal 2007 (ending March) earnings of $4.27 a share. This marks an 11% discount.

With that in mind, I'm here to answer investors' questions: Should I do it? Is Computer Sciences attractive to purchase at current levels, or can investors wait for a better entry point?

The company is one of the largest global IT consultants, with $14.6 billion of total revenue in fiscal 2006. Computer Sciences also offers business-process outsourcing and handles payment/billing, call-center and other customer-relationship management services. About one-third of the company's revenue comes from government agencies.

On Sept. 27, Computer Sciences said it had won $2.6 billion in contracts from the federal government since July 1. For the fiscal second quarter (ended September), Keane expects the company to grow bookings 250% year over year.

That growth includes a $3.7 billion contract that Computer Sciences said in September it took over from


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to install a patient-record system for the U.K. National Health Service. Plagued with problems from a local subcontractor, Accenture reserved $450 million to cover losses from the project. Even so, Computer Sciences has worked successfully with the NHS before, and the contract has been rewritten to limit the company's potential downside.

On the expense line, management has targeted $300 million of pretax cost cuts over the next two years, including shrinking its workforce by 5,000. Assuming that revenue remains constant, this margin expansion could add more than $1 a share to Computer Sciences' earnings by the end of fiscal 2008.

So yes, I do believe that Computer Sciences is attractive to purchase at current levels. Recent contract wins are likely a sign that the company will continue to build up its backlog into the new calendar year. With that in mind, I believe the stock can trade back up toward $60 over the coming months.

Interested in more value stock picks? Check out David Peltier's Value Investor.

David Peltier is a research associate at In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Peltier appreciates your feedback;

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