Very few brands have the distinction of having their corporate name become “genericized” so that the brand is synonymous with the activity. Google (GOOGL) is perhaps the most well known today, with the phrase “Google It” meaning any internet search.
Unless you’re of a certain age, you may not know the term “Make a Xerox”. And while documents are still being “Xeroxed” (or copied) the namesake company, Xerox (XRX) is much more than a paper company these days.
Today’s Xerox has evolved into a printer and printer solutions company, with a focus on software, document security, and even a VR (virtual reality) offering that let’s IT personnel remotely view and diagnose physical issues from any location. The software is compatible with iOS and Android so workers can run it on their phones.
In an update on its evolution in its latest earnings report, Steve Bandrowczak, Xerox CEO stated, "As we enter 2024, we are focused on stabilizing and strengthening our core Print business, driving enterprise-wide efficiency and productivity gains through our new Global Business Services organization, and further capturing opportunities in Digital and IT Services. We expect balanced execution on these priorities, supported by our new operating model, will yield significant progress towards our three-year adjusted operating income improvement target of $300 million above 2023 levels."
Since the company has shifted gears and diversified its business outward from just copy machines, it appears to have fallen off investor’s radar. It’s currently trading at a forward PE of only 7.8x and at only 0.35x sales.
On top of that, XRX currently pays a 5.23% dividend, and rates a B overall in our POWR Ratings. Its highest component score is, not surprisingly, in the Value component, given the high dividend and the low earnings valuation. XRX scores close to 95% in this component.
Xerox has been working diligently to strengthen its balance sheet over the past few years, and a large share repurchase in 2022 from Carl Icahn, which was not part of its regular repurchase program, is a great indicator of the track the company is on.
The stock has put in some work since late last year, and rocketed higher on its recent earnings release. But, I still think the stock has room to run back into the $20s, a level it last saw in 2022. This could be a great time to pick up shares on any overall market weakness, if XRX retraces any of its earnings announcement gains.
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XRX shares were trading at $19.08 per share on Tuesday afternoon, down $0.53 (-2.70%). Year-to-date, XRX has gained 4.09%, versus a 3.37% rise in the benchmark S&P 500 index during the same period.
About the Author: Jay Soloff
Jay is a former professional market maker who cut his teeth trading on the floor of the CBOE. With more than 20 years of experience trading and investing, his focus is on making professional strategies accessible to everyone, which is exactly what does in his highly profitable POWR Income and POWR Stocks Under $10 investment advisory services.
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