Amdocs Ltd (NASDAQ:DOX) is the kind of stock that often catches the eye of contrarian-minded investors: a company with strong underlying profitability, a clean balance sheet, and a dividend yield north of 4%, yet trading at a single-digit P/E. It emerged from a screen designed to uncover “decent value” – stocks that are not just cheap on paper, but also backed by respectable profitability, financial health, and at least moderate growth. This approach aims to avoid the classic value trap by ensuring that the low valuation is supported by real business quality rather than hidden deterioration.
Why Valuation Screams “Cheap”
The most obvious draw for a value investor is the price tag. DOX carries a trailing Price/Earnings ratio of just 7.30, a fraction of the S&P 500’s average of 26.19 and well below the IT Services industry median of 33.13. Even more striking is the forward P/E of 6.40, implying that the market expects next year’s earnings to be barely higher than current levels, yet the business has historically grown EPS at nearly 10% annually. On an EV/EBITDA basis, DOX is cheaper than roughly 80% of its peers. This combination of low multiples relative to both history and the broader market suggests that either the market has overreacted to a temporary slowdown or the company is genuinely undervalued.
At the same time, the stock’s price has dropped about 20% in the last three months, which has lifted the dividend yield to an attractive 4.48%. While a sharp decline can sometimes signal trouble, in this case it may have created an entry point for income-oriented value investors, especially given that DOX has maintained and increased its dividend for over a decade.
Profitability: A High???Bar Business
A low P/E is meaningless if earnings are poor or declining. Here, profitability is a clear strength. The company earns a Return on Invested Capital (ROIC) of 14.12%, which places it in the top 14% of its industry and is actually improving, the three???year average ROIC was 12.81%. Operating margins of 17.74% are among the very best in the sector (better than 90% of peers), and profit margins have been stable. These figures indicate that DOX is not merely a cheap stock; it is a well???run business capable of generating solid returns on the capital it deploys. For value investors, high profitability provides a margin of safety: even if growth stalls, the company can still reward shareholders through earnings and dividends.
Growth: Slow but Steady, With an Acceleration Catalyst
Growth is the weakest link in the chain, which is often why a stock becomes cheap. Revenue dipped 2.73% last year, and the five???year average revenue growth is a modest 1.69% per year. However, earnings per share have grown at a compound rate of 9.50% over the past five years, thanks to share buybacks (the share count has been decreasing) and margin expansion. Looking forward, analysts expect EPS to grow by nearly 10% annually over the next few years, while revenue growth is projected to re???accelerate to about 3.9% annually. That is not explosive growth, but it is steady, and the accelerating revenue trend is a positive sign for a company that had been in a soft patch. For a decent???value screen, the criteria are not about blazing growth, but about avoiding stagnation. DOX passes that test.
Financial Health: Solvent but With a Liquidity Caveat
The health picture is mixed but manageable. The company has a strong Altman Z???Score of 3.89, well above the danger zone and better than 70% of its industry. Its debt???to???equity ratio is a conservative 0.19, and the debt???to???free???cash???flow ratio is just 1.32, meaning it could repay all its debt in a little over a year using free cash flow alone. That is a very comfortable solvency profile.
On the liquidity side, however, both the current ratio and quick ratio stand at 0.98, which is below 1.0 and worse than three???quarters of peers. While a current ratio below 1.0 can signal potential short???term payment issues, it is important to interpret this in context. DOX has strong operating cash flow, high profitability, and easy access to capital markets. The low current ratio likely reflects efficient working capital management rather than imminent distress. The health rating of 6/10 is therefore acceptable for a value stock, especially when solvency is strong.
Putting It All Together: A Decent Value Candidate
The fundamental report on DOX gives it an overall rating of 7/10, with standout scores of 8/10 in both valuation and profitability, and a very strong 8/10 for dividend. The growth rating of 4/10 and health rating of 6/10 temper the picture, but not enough to disqualify it. What makes DOX interesting is the combination of a cheap valuation with excellent profitability and a reliable dividend – a triad that value investors prize. The recent price decline has made the valuation even more compelling, while the underlying business shows no signs of distress.
For a deeper look into the numbers behind this assessment, you can review the full fundamental analysis report for DOX, which breaks down each of the five rating categories in detail.
Finding More Opportunities Like This
Stocks that offer a strong valuation alongside decent profitability, health, and growth are not easy to come by – but they can be systematically identified. The screen that produced DOX applies filters for a valuation rating of 7 or higher, while requiring minimum thresholds for growth, health, and profitability. If you want to explore other names that meet similar criteria, you can run the same screen yourself:
Find more decent value stocks using this exact screen
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always conduct your own research before making any investment decisions.
Read full article here »
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Amdocs Ltd (NASDAQ:DOX): A Value Stock with a 4% Dividend and Single-Digit P/E
Amdocs Ltd (NASDAQ:DOX) is the kind of stock that often catches the eye of contrarian-minded investors: a company with strong underlying profitability, a clean balance sheet, and a dividend yield north of 4%, yet trading at a single-digit P/E. It emerged from a screen designed to uncover “decent value” – stocks that are not just cheap on paper, but also backed by respectable profitability, financial health, and at least moderate growth. This approach aims to avoid the classic value trap by ensuring that the low valuation is supported by real business quality rather than hidden deterioration.
Why Valuation Screams “Cheap”
The most obvious draw for a value investor is the price tag. DOX carries a trailing Price/Earnings ratio of just 7.30, a fraction of the S&P 500’s average of 26.19 and well below the IT Services industry median of 33.13. Even more striking is the forward P/E of 6.40, implying that the market expects next year’s earnings to be barely higher than current levels, yet the business has historically grown EPS at nearly 10% annually. On an EV/EBITDA basis, DOX is cheaper than roughly 80% of its peers. This combination of low multiples relative to both history and the broader market suggests that either the market has overreacted to a temporary slowdown or the company is genuinely undervalued.
At the same time, the stock’s price has dropped about 20% in the last three months, which has lifted the dividend yield to an attractive 4.48%. While a sharp decline can sometimes signal trouble, in this case it may have created an entry point for income-oriented value investors, especially given that DOX has maintained and increased its dividend for over a decade.
Profitability: A High???Bar Business
A low P/E is meaningless if earnings are poor or declining. Here, profitability is a clear strength. The company earns a Return on Invested Capital (ROIC) of 14.12%, which places it in the top 14% of its industry and is actually improving, the three???year average ROIC was 12.81%. Operating margins of 17.74% are among the very best in the sector (better than 90% of peers), and profit margins have been stable. These figures indicate that DOX is not merely a cheap stock; it is a well???run business capable of generating solid returns on the capital it deploys. For value investors, high profitability provides a margin of safety: even if growth stalls, the company can still reward shareholders through earnings and dividends.
Growth: Slow but Steady, With an Acceleration Catalyst
Growth is the weakest link in the chain, which is often why a stock becomes cheap. Revenue dipped 2.73% last year, and the five???year average revenue growth is a modest 1.69% per year. However, earnings per share have grown at a compound rate of 9.50% over the past five years, thanks to share buybacks (the share count has been decreasing) and margin expansion. Looking forward, analysts expect EPS to grow by nearly 10% annually over the next few years, while revenue growth is projected to re???accelerate to about 3.9% annually. That is not explosive growth, but it is steady, and the accelerating revenue trend is a positive sign for a company that had been in a soft patch. For a decent???value screen, the criteria are not about blazing growth, but about avoiding stagnation. DOX passes that test.
Financial Health: Solvent but With a Liquidity Caveat
The health picture is mixed but manageable. The company has a strong Altman Z???Score of 3.89, well above the danger zone and better than 70% of its industry. Its debt???to???equity ratio is a conservative 0.19, and the debt???to???free???cash???flow ratio is just 1.32, meaning it could repay all its debt in a little over a year using free cash flow alone. That is a very comfortable solvency profile.
On the liquidity side, however, both the current ratio and quick ratio stand at 0.98, which is below 1.0 and worse than three???quarters of peers. While a current ratio below 1.0 can signal potential short???term payment issues, it is important to interpret this in context. DOX has strong operating cash flow, high profitability, and easy access to capital markets. The low current ratio likely reflects efficient working capital management rather than imminent distress. The health rating of 6/10 is therefore acceptable for a value stock, especially when solvency is strong.
Putting It All Together: A Decent Value Candidate
The fundamental report on DOX gives it an overall rating of 7/10, with standout scores of 8/10 in both valuation and profitability, and a very strong 8/10 for dividend. The growth rating of 4/10 and health rating of 6/10 temper the picture, but not enough to disqualify it. What makes DOX interesting is the combination of a cheap valuation with excellent profitability and a reliable dividend – a triad that value investors prize. The recent price decline has made the valuation even more compelling, while the underlying business shows no signs of distress.
For a deeper look into the numbers behind this assessment, you can review the full fundamental analysis report for DOX, which breaks down each of the five rating categories in detail.
Finding More Opportunities Like This
Stocks that offer a strong valuation alongside decent profitability, health, and growth are not easy to come by – but they can be systematically identified. The screen that produced DOX applies filters for a valuation rating of 7 or higher, while requiring minimum thresholds for growth, health, and profitability. If you want to explore other names that meet similar criteria, you can run the same screen yourself:
Find more decent value stocks using this exact screen
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always conduct your own research before making any investment decisions.
Read full article here »