Stock price when the opinion was issued
XRX has really struggled, with the stock down 43% this year. It is very cheap at 6X earnings, but is likely a value trap. Debt is very high, at about 6X cash flow. Sales are in decline, and are about half the level they were a decade ago. It is still profitable, however. EPS is half the level of 2016. The dividend payout ratio is only about 30%. The dividend was cut in 2017. Its small size and debt adds a lot of risk here. Market cap is only $1.3B, down from near $20B decades ago. It is expected to grow in the 2% to 3% range over the next couple of years. We would not consider the dividend to be safe, though with rates decline its debt burden becomes a bit less onerous. Still, not our type of stock and we would not suggest it.
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He likes the Tech sector. This company is a turnaround situation. They’ve missed a number of quarters of earnings and guidance. There is a lot of hope that they can get things turned around, but it is a little bit of a challenged story. You need to give it a little more time. The risk outweighs the return.