Cognizant (CTSH): Assessing Valuation After New Infrastructure Tech Partnership With North Carolina Turnpike Authority

When Cognizant Technology Solutions (CTSH) announced its partnership with the North Carolina Turnpike Authority to overhaul tolling infrastructure alongside Volvo Car USA and Mastercard, it was a clear signal to the market that Cognizant continues to push deeper into advanced IoT and API-driven solutions. For investors, this project is compelling because it demonstrates how Cognizant’s technology is being used to disrupt an area not traditionally associated with digital innovation, laying out real-world applications for connected, infrastructure-light models. The initiative also highlights Cognizant's ability to orchestrate complex multi-partner environments, a quality increasingly in demand among enterprise clients looking for seamless tech integrations.

This announcement comes at a time when Cognizant’s share price performance has lagged broader market trends, slipping around 8% over the past year despite ongoing efforts to secure new business and pursue strategic acquisitions. The stock’s momentum has slowed this year and this echoes broader concerns about cash flows and segment growth, even as the company consistently lands deals and demonstrates capacity for revenue expansion through initiatives like this NCTA project. While its longer-term returns remain positive, near-term sentiment has cooled and investors are watching closely to see if these types of partnerships can reignite growth.

Given the mix of short-term caution and long-term innovation on display, does Cognizant now represent a bargain for patient investors, or is the market already factoring in all of its next-gen ambitions?

Most Popular Narrative: 20.4% Undervalued

According to the most widely followed narrative, Cognizant Technology Solutions is trading at a significant discount to its fair value, supported by expectations for growth in earnings and profit margins over the next several years.

Client transition from experimentation to large-scale implementation of GenAI and automation projects is fueling a new wave of large, multi-year deal wins, especially in Financial Services and Health Sciences. This indicates stronger long-term recurring revenue visibility and potential for sustained double-digit EPS growth.

What is the secret ingredient behind this bullish valuation? The narrative relies on ambitious assumptions around future profitability, revenue momentum, and share reduction, hinting at a financial trajectory normally reserved for industry leaders. Curious which numbers power this discounted fair value and set Cognizant apart from its rivals? The deeper details behind these growth drivers may surprise you.

Result: Fair Value of $86.95 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, risks remain, including intense competition from other IT firms and regulatory pressures. Either of these factors could challenge Cognizant’s optimistic growth trajectory.

Find out about the key risks to this Cognizant Technology Solutions narrative.

Another View: What Does the SWS DCF Model Say?

While analysts see Cognizant as undervalued using future earnings estimates, our DCF model, which is based on projected cash flows, presents a similar perspective and suggests the shares are below their long-term intrinsic value. Which valuation should drive your next decision?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Cognizant Technology Solutions for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Cognizant Technology Solutions Narrative

If you have a different perspective or want to build a view rooted in your own research, you can easily create a personalized narrative in just a few minutes. Do it your way

A great starting point for your Cognizant Technology Solutions research is our analysis highlighting 5 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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