The Falls Church, VA-based IT and professional services company's rating was lowered after its spin-off of CSRA, which focuses on clients in the U.S. government, the firm said.
Additionally, the company's restructuring successfully unlocked value for shareholders at the end of 2015, Barclays said.
The IT consulting sector has seen ongoing demand in the financial and healthcare sectors, the firm added. Barclays projects the global IT services sector will grow about 4% in 2016.
The firm lowered its price target on the stock to $35 from $76.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate COMPUTER SCIENCES CORP as a Hold with a ratings score of C. 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 largely solid financial position with reasonable debt levels by most measures, growth in earnings per share and increase in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and poor profit margins.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is somewhat low, currently at 0.87, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.17, which illustrates the ability to avoid short-term cash problems.
- Despite the weak revenue results, CSC has outperformed against the industry average of 26.9%. Since the same quarter one year prior, revenues fell by 11.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- COMPUTER SCIENCES 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, COMPUTER SCIENCES CORP reported lower earnings of $0.04 versus $5.71 in the prior year. This year, the market expects an improvement in earnings ($2.60 versus $0.04).
- The gross profit margin for COMPUTER SCIENCES CORP is currently lower than what is desirable, coming in at 27.36%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 6.15% significantly trails the industry average.
- Net operating cash flow has decreased to $117.00 million or 46.08% 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.
- You can view the full analysis from the report here: CSC