Will Computer Sciences (CSC) Stock be Hurt Today by SEC Penalty?

NEW YORK (TheStreet) -- Computer Sciences (CSC) shares are flat at $63.98 in pre-market trading on Tuesday after the information technology company reached a $190 million settlement with the SEC after an accounting probe by the agency found irregularities on the company's books.

Computer Sciences will also have to adjust its financial statements for fiscal 2010-2012. It's net income for 2010 and 2011 will be reduced by $50 million and $3.69 billion, respectively, while net income for 2012 will be increased by $3.9 billion, according to a regulatory filing yesterday.

The company said that it will not admit or deny the commission's allegations.

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TheStreet Ratings team rates COMPUTER SCIENCES CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate COMPUTER SCIENCES CORP (CSC) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • COMPUTER SCIENCES CORP has improved earnings per share by 16.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, COMPUTER SCIENCES CORP increased its bottom line by earning $4.21 versus $3.07 in the prior year. This year, the market expects an improvement in earnings ($4.63 versus $4.21).
  • The debt-to-equity ratio is somewhat low, currently at 0.75, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, CSC has a quick ratio of 1.52, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.3%. Since the same quarter one year prior, revenues slightly dropped by 3.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • You can view the full analysis from the report here: CSC Ratings Report
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