Why Cognizant Technology Solutions Corporation (NASDAQ:CTSH) Could Be A Buy

Cognizant Technology Solutions Corporation (NASDAQ:CTSH) saw significant share price volatility over the past couple of months on the NasdaqGS, rising to the highs of $84.83 and falling to the lows of $75.03. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Cognizant Technology Solutions's current trading price of $75.39 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. See our latest analysis for Cognizant Technology Solutions

What's the opportunity in Cognizant Technology Solutions?

Cognizant Technology Solutions appears to be overvalued by 25% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$75.39 on the market compared to my intrinsic value of $60.4. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Since Cognizant Technology Solutions’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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.

What does the future of Cognizant Technology Solutions look like?

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’s earnings over the next few years are expected to increase by 96.10%, 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? It seems like the market has well and truly priced in CTSH’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe CTSH should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on CTSH for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for CTSH, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Cognizant Technology Solutions. You can find everything you need to know about Cognizant Technology Solutions in the latest infographic research report. If you are no longer interested in Cognizant Technology Solutions, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.