May 14, 2010
Written By Ian Wyatt
In many places of business, the name Xerox is synonymous with photocopy. The dictionary actually includes ‘xerox’ as a verb. Although Xerox Corp. (XRX, NYSE) management is proud of the business and strong brand name, they want investors to know that Xerox can do far more than simply photocopy documents. Over the last 24 months, through well-suited acquisitions, Xerox has been able to broaden its business’ services to include IT and business process outsourcing. These strategic steps have doubled its potential market opportunity from $250 billion to $500 billion. The company is now well positioned to benefit from increased business spending as the economy fully recovers, and it’s diversified revenue streams will offer protection should another economic downturn arise. …
The recent acquisition of ACS and increases in business spending should help the company grow at a double digit pace for the next few years. Xerox has also put together a nice string of earnings beats, which is what money managers and funds are look for when putting money, particularly fresh money, to work in this environment. Considering the strong economy and 1.8% yield, the stock is attractively priced at 11 times current EPS. I am expecting this stock to rise 25% to $12.75 this year, which would still only reflect a PE of 14 times current and 12 times my forward estimate. Xerox has changed a lot over the past couple years, but much has also stayed the same. Xerox maintains a great corporate culture and is always rated one of America’s most socially diversified workplaces. Document management is still the heart of the business, but the company is well positioned to expand as demand for outsourcing increases in the upcoming years. The company sits wedged between three growing industries representing a $500 billion marketplace. This is a great stock for any long-term investor which is why I have chosen to add shares of it to the Top Stock Insight’s portfolio this month.
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