Stock Analysis

Why Cognizant Technology Solutions Corporation (NASDAQ:CTSH) Could Be Worth Watching

  •  Updated
NasdaqGS:CTSH
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Today we're going to take a look at the well-established Cognizant Technology Solutions Corporation (NASDAQ:CTSH). The company's stock saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$70.30 and falling to the lows of US$57.97. 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$59.26 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

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. I’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 13.58x is currently well-below the industry average of 25.39x, meaning that it is trading at a cheaper price relative to its peers. 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?

earnings-and-revenue-growth
NasdaqGS:CTSH Earnings and Revenue Growth September 29th 2022

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 34% 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 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 capital structure 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 prosperous 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 assessment.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 1 warning sign for Cognizant Technology Solutions and you'll want to know about it.

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.

Valuation is complex, but we're helping make it simple.

Find out whether Cognizant Technology Solutions is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About NasdaqGS:CTSH

Cognizant Technology Solutions

Cognizant Technology Solutions Corporation, a professional services company, provides consulting and technology, and outsourcing services in North America, Europe, and internationally.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation5
Future Growth1
Past Performance5
Financial Health6
Dividends3

Read more about these checks in the individual report sections or in our analysis model.

Flawless balance sheet and undervalued.