What is XRX's Intrinsic value?

Xerox Holdings Corp (XRX) Intrinsic Value Analysis

Executive Summary

As of June 21, 2025, Xerox Holdings Corp's estimated intrinsic value ranges from $18.11 to $18.11 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Earnings Power Value $18.11 +237.3%

Is Xerox Holdings Corp (XRX) undervalued or overvalued?

With the current market price at $5.37, the stock appears to be significantly undervalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Xerox Holdings Corp's intrinsic value, including:

  1. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 2.11 2.49
Cost of equity 13.6% 18.8%
Cost of debt 5.4% 23.9%
Tax rate 6.6% 15.3%
Debt/Equity ratio 5.32 5.32
After-tax WACC 6.4% 20.0%

Valuation Methods

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $506M
Discount Rate (WACC) 20.0% - 6.4%
Enterprise Value $2,533M - $7,948M
Net Debt $2,962M
Equity Value $(429)M - $4,986M
Outstanding Shares 126M
Fair Value $(3) - $40
Selected Fair Value $18.11

Key Financial Metrics

Metric Value
Market Capitalization $675M
Enterprise Value $3637M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 8.40
Current Dividend Yield 2203.13%
Dividend Growth Rate (5Y) -11.51%
Debt-to-Equity Ratio 5.32

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Earnings Power Value 100% $1.81
Weighted Average 100% $18.11

Investment Conclusion

Based on our comprehensive valuation analysis, Xerox Holdings Corp's weighted average intrinsic value is $18.11, which is approximately 237.3% above the current market price of $5.37.

Key investment considerations:

  • Strong projected earnings growth (-21% to -1% margin)
  • Consistent cash flow generation

Given these factors, we believe Xerox Holdings Corp is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.