Xerox Corporation Stock Downgraded (XRX)

NEW YORK ( TheStreet) -- Xerox Corporation (NYSE: XRX) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • XEROX CORP reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, XEROX CORP increased its bottom line by earning $0.89 versus $0.41 in the prior year. This year, the market expects an improvement in earnings ($1.07 versus $0.89).
  • 37.10% is the gross profit margin for XEROX CORP which we consider to be strong. Regardless of XRX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 5.60% trails the industry average.
  • Net operating cash flow has decreased to $228.00 million or 34.29% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Office Electronics industry average. The net income has decreased by 3.1% when compared to the same quarter one year ago, dropping from $319.00 million to $309.00 million.

Xerox Corporation provides business process and information technology (IT) outsourcing, and document management services worldwide. The company has a P/E ratio of 7.4, equal to the average consumer durables industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Xerox has a market cap of $8.69 billion and is part of the consumer goods sector and consumer durables industry. Shares are down 14.7% year to date as of the close of trading on Monday.

You can view the full Xerox Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
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