Xerox Holdings Corporation
XRX
is currently aided by a post-sale-driven business model and strong margins.
Factors That Augur Well
Xerox has a post-sale driven business model that provides significant recurring revenues and cash generation. Around 78% of XRX’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 XRX make strategic investments and penetrate the markets with high growth potential.
Xerox has a solid track of record strong margins, which it is witnessing through cost and productivity initiatives. XRX’s 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. In 2021, Xerox exceeded its cost savings target of $375 million through the project. XRX is hopeful of producing nearly $300 million in cost savings in 2022.
Acquisition is a key growth strategy for Xerox. Recently, XRX acquired Go Inspire. This acquisition supports Xerox’s commitment to expand its Digital Services business and bring innovative solutions to the workplace.
Some Risks
Xerox’s current ratio at the end of the March quarter is 1.21, lower than the current ratio of 1.66 reported at the end of the December quarter and the prior-year quarter’s 2.05. Decreasing current ratio is not desirable as it indicates that a company may have problems meeting its short-term debt obligations.
Shares of XRX have plunged 42.5% in the past year compared with the 20.4% fall of the
industry
it belongs to.
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Zacks Rank and Stocks to Consider
Xerox currently carries a Zacks Rank #3 (Hold). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the broader Zacks
Business Services
sector are
Avis Budget Group, Inc.
CAR
, Genpact Limited
G
and
CRA International, Inc.
CRAI
.
Avis Budget sports a Zacks Rank #1 at present. CAR has a long-term earnings growth expectation of 19.4%.
Avis Budget delivered a trailing four-quarter earnings surprise of 102%, on average.
Genpact carries a Zacks Rank of 2 at present. G has a long-term earnings growth expectation of 12.3%.
Genpact delivered a trailing four-quarter earnings surprise of 13.3%, on average.
CRA International carries a Zacks Rank #2 (Buy), currently. CRAI has a long-term earnings growth expectation of 14.3%.
CRAI delivered a trailing four-quarter earnings surprise of 35.8%, on average.
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