DXC has gotten torched over the last six months - since December 2025, its stock price has dropped 45.6% to $8.22 per share. This was partly due to its softer quarterly results and might have investors contemplating their next move.
Is there a buying opportunity in DXC, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Do We Think DXC Will Underperform?
Even with the cheaper entry price, we don’t have much confidence in DXC. Here are three reasons why there are better opportunities than DXC, plus one stock we’d rather own.
1. Core Business Falling Behind as Demand Declines
In addition to reported revenue, organic revenue is a useful data point for analyzing IT Services & Consulting companies. This metric gives visibility into DXC’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, DXC’s organic revenue averaged 4.6% year-on-year declines. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests DXC might have to lean into acquisitions to grow, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus). 
2. Revenue Projections Show Stormy Skies Ahead
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect DXC’s revenue to drop by 3.6%, close to its 6.5% annualized declines for the past five years. This projection doesn’t excite us and suggests its newer products and services will not accelerate its top-line performance yet.
3. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
DXC historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 2.1%, lower than the typical cost of capital (how much it costs to raise money) for business services companies.
Final Judgment
DXC doesn’t pass our quality test. Following the recent decline, the stock trades at 3.2× forward P/E (or $8.22 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are more exciting stocks to buy at the moment. We’d suggest looking at one of our top digital advertising picks.
Stocks We Like More Than DXC
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