After consolidating at the $26-$28 level, Nutanix (NASDAQ:NTNX) rose sharply after posting earnings. DXC Technology (NYSE:DXC) is still inexpensive on a price-to-earnings measure. Investors should consider watching both stocks.
Nutanix posted a non-GAAP EPS loss of 41 cents. Revenue rose by 8.2% Y/Y to $344.5 million.
Subscription revenue strengthened to $307.3 million. The adjusted gross margin was 81.7%.
Nutanix is on a clear path to accelerating its revenue. Currently trading at around four times EV/sales, markets are ignoring the company’s underlying subscription growth. Expect sustained margins and revenue growth leading to strong operating profits over the next year.
DXC posted fourth-quarter revenue falling 9% for the year. Still, its adjusted EPS of 74 cents beat consensus estimates. DXC forecast Q1 revenue will decline to just 2-4%. That would imply an EPS of 72 cents – 76 cents. For the year, DXC expects EPS in the range of $3.45 - $3.65. After rising steadily over the last year, DXC continues to trade at a discount. At these levels, investors may hold this stock and expect a steady climb from here.
DXC’s sharp drop from 2019 created a one-time opportunity to pick up shares at the 2020 lows. It has a good chance of returning to the 2018-19 highs in the $50 - $100 range next.
Management fixed the core problems of the business, such as lost customers. Now it may focus on winning new business.
