What Does Cognizant Technology Solutions Corporation's (NASDAQ:CTSH) Share Price Indicate?

Let's talk about the popular Cognizant Technology Solutions Corporation (NASDAQ:CTSH). The company's shares received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$63.02 at one point, and dropping to the lows of US$51.96. 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$55.58 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.

Check out our latest analysis for Cognizant Technology Solutions

Is Cognizant Technology Solutions Still Cheap?

Good news, investors! Cognizant Technology Solutions is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Cognizant Technology Solutions’s ratio of 12.18x is below its peer average of 27.07x, which indicates the stock is trading at a lower price compared to the IT industry. What’s more interesting is that, Cognizant Technology Solutions’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Cognizant Technology Solutions?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Cognizant Technology Solutions' earnings over the next few years are expected to increase by 25%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

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 accumulate more of your holdings in the stock. With a positive 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 want to dive deeper into Cognizant Technology Solutions, you'd also look into what risks it is currently facing. For example, we've discovered 2 warning signs 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.