NEW YORK (TheStreet) -- Xerox (XRX) stock is higher by 1.40% to $10.75 in pre-market trading on Tuesday morning, after it was announced that billionaire activist investor Carl Icahn has taken a 7.1% stake in the business process and document management solutions company.
Icahn disclosed his stake in the company in a filing with the Securities and Exchange Commission, the New York Times reports, adding that Icahn feels the stock is undervalued.
Icahn is intending to hold "discussions with Xerox's board about improving operational performance and pursuing strategic alternatives, as well as potentially attaining board representation," he said in the SEC filing.
Xerox shares have falling by 22% this year.
"We are aware that Carl Icahn has made an investment in the company," Xerox said in a statement to the Times. "Xerox welcomes open communications with shareholders and values constructive dialogue."
Separately, TheStreet Ratings team rates XEROX CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate XEROX CORP (XRX) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is somewhat low, currently at 0.80, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.91 is somewhat weak and could be cause for future problems.
- Despite the weak revenue results, XRX has outperformed against the industry average of 27.0%. Since the same quarter one year prior, revenues slightly dropped by 7.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Net operating cash flow has significantly decreased to $271.00 million or 54.45% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the IT Services industry and the overall market, XEROX CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full analysis from the report here: XRX