Is It Too Late To Consider Buying Cognizant Technology Solutions Corporation (NASDAQ:CTSH)?

Cognizant Technology Solutions Corporation (NASDAQ:CTSH) received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$75.15 at one point, and dropping to the lows of US$64.26. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Cognizant Technology Solutions' current trading price of US$67.73 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Cognizant Technology Solutions’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Cognizant Technology Solutions

What Is Cognizant Technology Solutions Worth?

Great news for investors – Cognizant Technology Solutions is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 16.1x is currently well-below the industry average of 27.89x, meaning that it is trading at a cheaper price relative to its peers. Although, there may be another chance to buy again in the future. This is because Cognizant Technology Solutions’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Cognizant Technology Solutions look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 36% over the next couple of years, the future seems bright for Cognizant Technology Solutions. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? Since CTSH is currently below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on CTSH for a while, now might be the time to enter the stock. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy CTSH. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

If you'd like to know more about Cognizant Technology Solutions as a business, it's important to be aware of any risks it's facing. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Cognizant Technology Solutions.

If you are no longer interested in Cognizant Technology Solutions, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com