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Here's Why You Should Retain Xerox (XRX) in Your Portfolio

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Xerox Holdings Corporation’s (XRX - Free Report) bottom line is benefiting from "Project Own It," an enterprise-wide transformation initiative aimed at increasing productivity and operational efficiency, reducing costs, as well as realigning the business to changing market conditions.

The company’s shares have gained 13.2% in the past six months, outperforming the 3.4% rise of the Zacks S&P 500 composite.

Factors That Augur Well

Project Own It is contributing significantly toward freeing up capital for investment. Through this initiative, the company exceeded gross savings of $375 million in 2021 and expects $450 million in gross cost savings in 2022.

Xerox’s ongoing investments in Xerox Business Solutions, indirect market channels and European sales channels are helping it to expand its small and mid-sized (SMB) market. The company is expanding its offerings through the inclusion of cyber security and robotic process automation solutions and expanding its IT Services business geographically to strengthen its foothold in the SMB market.

Xerox has a post-sale-driven business model that provides significant recurring revenues and cash generation. Around 78% of the company’s total revenues in 2021 were associated with contracted services, equipment maintenance services, consumable supplies and financing. This business model supports strong cash flows that help the company to make strategic investments and penetrate markets with high growth potential.

Some Risks

Xerox’s current ratio at the end of the third quarter of 2022 was pegged at 1.17, lower than the 1.20 reported at the end of the previous quarter and the prior-year quarter’s 1.88. A decline in the current ratio is not desirable as it indicates that the company may have problems meeting its short-term debt obligations.

Zacks Rank and Stocks to Consider

Xerox currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks are Vasta Platform ((VSTA - Free Report) ) and DocuSign ((DOCU - Free Report) ).Vasta Platform carries a Zacks Rank #1 (Strong Buy) at present. VSTA’s earnings are expected to grow 125.9% in 2023. You can see the complete list of today’s Zacks #1 Rank stocks here.

Vasta delivered a trailing four-quarter earnings surprise of 32.2% on average.

DocuSign is also a Zacks #1 Ranked stock. DOCU has a long-term earnings growth expectation of 13.7%.

DOCU delivered a trailing four-quarter earnings surprise of 6.6% on average.

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