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awallejr (82.59)

Why No love for Xerox?

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April 27, 2012 – Comments (12) | RELATED TICKERS: XRX

I blogged about this stock before.  I look at the numbers and don't understand why this stock is selling so cheaply.  Yeah they blew it big time back when by letting Jobs and Gates pretty much raid their "office of the future" ideas, but this company is in the midst of a transformation.  The purchase of ACS was a great move in my opinion, moving away from mere products to IT.  The company spins off a good chunk of change as free cash flow and has been using it to buy back its shares.  And at this price this is when they should be buying (at the cheap).  The company does project around a 1.10ish overall eps for this year. At current price this is more than outright bearish numbers.

While I understand the European weakness connection, nevertheless eps is still projected to grow, even if some of that growth is a result of share buybacks.  Pays a somewhat decent dividend too (way more than any bank cd).  I keep adding to real life holdings since I am a patient man but am just curious as to what am I missing about this company.

12 Comments – Post Your Own

#1) On April 27, 2012 at 11:27 AM, Valyooo (99.82) wrote:

There are two reasons

1) it's not aapl

2) "don't they make photocopy machines?"

 

I highly doubt there will be much price appreciation until they start raising their dividend significantly more 

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#2) On April 27, 2012 at 1:07 PM, awallejr (82.59) wrote:

Actually they are fast becoming more of an IT company.  The CEO already committed to a massive stock repurchase plan (using its free cash flow over the next few years) over a larger dividend.  While I always prefer dividends, a stock repurchase at these low levels seems sensible.  It's the Aapl repurchase I think is silly since the stock is at 600 with projections for further strong growth.  They should just take that money and make the dividend higher.

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#3) On April 27, 2012 at 1:48 PM, Valyooo (99.82) wrote:

My point was the Xerox is not sexy.  Sure, the buyback might make more sense theoretically, but if youre a brand that most people think makes copy machines (think being the key word), you need a sexy dividend to attract people.

Also, at $600 aapl is still cheap on a valuation basis. I like the buyback.

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#4) On April 27, 2012 at 2:36 PM, MegaShort (99.95) wrote:

It's cheap, but it appears to be a low ROI, low growth business.  There are lots of companies like that, HPQ for example.

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#5) On April 27, 2012 at 7:04 PM, awallejr (82.59) wrote:

Well if it didn't buy ACS I would look elsewhere, but it's outsourcing business is growing.  EPS growth expected to improve 13% for each of the next 2 years.  If it traded at the median average this would be a $15-16 stock, more than a double from here.  I see little downside risk, literal worse case maybe $5-6 versus a legitimate possibility at a double.

I bought more today.

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#6) On April 27, 2012 at 10:01 PM, Valyooo (99.82) wrote:

I'm done with value, I just want best of breed companies from now on

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#7) On April 28, 2012 at 12:40 AM, awallejr (82.59) wrote:

Best of breed does have a tendency of changing.  But a potential "double" is always worth a look.

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#8) On April 28, 2012 at 12:48 AM, awallejr (82.59) wrote:

Actually I have had a pretty good success rate on predictions on this site and I am willing to predict this stock will see mid teens by this time next year at the latest, absent any major macro event.

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#9) On May 19, 2012 at 5:18 PM, dwot (99.60) wrote:

Our xerox copiers where I work don't work so often... I wouldn't buy Xerox because my experience with it is that the products are very poor quality and customer services is horrendous.  We'll likely not be buying/leasing from Xerox again because we haven't been able to use our year and half old copier properly about half the year.  We wait weeks, or months for service and the problems are not fixed or return in mere days.  I kid you not, it took 3 months to get service at the beginning of the school year and service managers wouldn't even call us back.  Currently we can't double side copy, staple or hole punch, and the guy was in to fix it on a Friday and it wasn't working again by the end of the day on the following Monday.

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#10) On May 21, 2012 at 1:13 AM, awallejr (82.59) wrote:

Well sorry for the bad experience.  But I can say the same for other companies I suppose.  I hate Nissan and will never buy another product due to a bad experience, but others might love them.  The bottom line is EPS in my opinion, and it is growing, not declining.

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#11) On May 23, 2012 at 1:58 AM, valuemoney (99.99) wrote:

Debt is way too high. Definately agree with Megashort... ROI is way to low. And I hate all the goodwill on the books. Could be witten down in the future and retained earnings would plummit. Not a buyer. Agree with Valyoo statement #6.

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#12) On May 23, 2012 at 2:05 AM, valuemoney (99.99) wrote:

O and gross margins and net margins are way to low for my liking. Plus it is a tech company.

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