With cash balances greater than their debt, these companies have the financial flexibility to weather the challenges without great concern about principal or interest payments. And once the storm clouds clear, shareholders could see a sizable profit.
In its first year as an independent company following its spin-off from Xerox, technology services firm Conduent (NYSE: CNDT) is making clear progress on improving its operating profitability and generating cash. Conduent is transitioning along the path that management outlined a year ago. We expect continued progress in 2018.
Document technology company Xerox (NYSE: XRX) reported better 4Q17 revenues and profits. More strategically relevant: It announced that it will combine with long-time joint venture partner Fuji Xerox. Xerox shareholders will receive a cash dividend of approximately $9.80/share and will own 49.9% of the combined company. The combination makes a lot of sense to us as the Fuji Xerox partnership created an added layer of expenses and complexity that hobbled both its own success and Xerox Corp.'s performance. We're not entirely convinced that this deal will be completed, and the financial picture of the new combined company remains unclear; so we moving Xerox shares to a HOLD for now.
Office equipment maker Xerox (NYSE:XRX) reported a respectable quarter with modest improvements to profits on a 5% revenue decline. While smart one-time cash flow reductions appear to have surprised investors, the company’s future looks good with strong cash flows ahead and the stock selling at less than half the market’s high 19x earnings.
Office equipment maker Xerox (NYSE: XRX) reported that 2Q17 revenues declined 8% and adjusted earnings were down 15% from a year ago, but the leadership expressed considerable confidence that the rest of the year would show stronger results.
FTI Consulting (NYSE: FCN) reported weak 1Q17 revenues and earnings as the recent wave of energy, mining and retail bankruptcies has crested and passed. Their franchise appears intact and overall the company is improving its business model.
Recently I was asked how my investing perspective changed over the 32 years of publishing The Turnaround Letter. It's a fascinating question because change is constant, and often beneficial (although that's not a given) in the business world. If change is the norm, can investing principles stay constant? I firmly believe that they can.
EV/EBITDA: What Is It & Why Are We Using It More?
In reading recent editions of The Turnaround Letter, you have probably noticed that we are increasingly using EV/EBITDA as a valuation measure, rather than the better-known price/earnings multiple. We thought it might be useful to describe this measure and why we like it.
This Forbeswrite-up follows up on the recent Top Stock Tips report--naming The Turnaround Letter's Crocs recommendation the top performer of 2017: With 90% gains, CROX beat out 100 other investment ideas included in the report; and the stock continues to have value investing appeal, according to Putnam.
George notes, "We see additional upside for the stock in 2018 as management's efforts continue to bear fruit, though the gains will likely be more muted than we saw in 2017."