Cognizant (CTSH) AI Stock Analysis

• Market Cap: $36.24B
• Dividend Yield: 1.76%
• Average Volume (3M): 4.55M
• Price to Earnings (P/E): 16.3
• Beta (1Y): 0.88
• Revenue Growth: 1.98%
• EPS Growth: 7.16%
• Country: US
• Employees: 336,800
• Sector: Technology
• Sector Strength: 40
• Industry: Information Technology Services
• EPS (TTM): 4.51
• Shares Outstanding: 494,615,500
• 10 Day Avg. Volume: 4,331,891
• 30 Day Avg. Volume: 4,547,959
• PEG Ratio: 2.27
• Price to Book (P/B): N/A
• Price to Sales (P/S): 1.92
• Price to Cash Flow (P/CF): 10.30
• P/FCF Ratio: 10.30
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $91.33
• Price Target Upside: 32.86% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 13

Cognizant's strong financial performance and positive earnings call outlook are offset by technical weaknesses, suggesting potential short-term challenges. The company's fair valuation and strategic growth initiatives provide a solid long-term foundation, but investors should be wary of current market sentiment and technical indicators.

Positive Factors

Growth Opportunities

Cognizant plans to pursue growth opportunities by focusing on core competencies in Financials and Healthcare, driving client wins with AI, and diversifying into faster-growth verticals.

Strategic Improvements

Increased confidence in the strategic and operational improvements made by Cognizant since the appointment of the new CEO.

Negative Factors

Economic Concerns

NT spending trends, especially on discretionary IT initiatives, may be muted across the industry because of concerns about the economy.

Market Uncertainty

Elevated uncertainty in the IT services market has made investors less confident in the achievability of industry estimates.

Cognizant Business Overview & Revenue Model

Company Description

Cognizant Technology Solutions Corporation (CTSH) is a leading professional services company specializing in information technology, consulting, and business process outsourcing services. With a global presence, Cognizant serves clients across various industries, including financial services, healthcare, manufacturing, and retail, offering digital solutions that drive business transformation. The company is known for its expertise in digital engineering, data analytics, cloud services, and artificial intelligence, helping clients innovate and optimize their business operations.

How the Company Makes Money

Cognizant makes money primarily through its diverse portfolio of IT services and solutions, which are segmented into four main business units: Financial Services, Healthcare, Products and Resources, and Communications, Media, and Technology. The company generates revenue by providing IT consulting, systems integration, application development and maintenance, and business process outsourcing services. Additionally, Cognizant earns from digital services like cloud computing, data analytics, and artificial intelligence, which are increasingly in demand as companies seek digital transformation. Key revenue streams include long-term contracts with large enterprises and partnerships with major technology providers, which facilitate the delivery of comprehensive digital solutions. The company's ability to leverage its global delivery network and expertise across various industries also significantly contributes to its earnings.

Cognizant Financial Statement Overview

Summary

Cognizant showcases a strong financial position with steady revenue growth, robust profitability, and low leverage. The balance sheet is healthy with substantial equity backing and minimal debt, providing financial resilience. While cash flow generation remains efficient, declining free cash flow growth warrants monitoring.

Income Statement

Cognizant has shown a consistent revenue growth trajectory, with a TTM revenue of $19.74 billion, up from $19.35 billion in the previous year. The company maintains solid profitability with a gross profit margin of 32.35% and a net profit margin of 11.35% as of TTM. EBIT and EBITDA margins stand at 14.92% and 15.63%, respectively, indicating operational efficiency. However, a slight decline in gross profit and EBITDA margins over recent periods suggests potential cost pressures.

Balance Sheet

The balance sheet reflects a strong equity position with a debt-to-equity ratio of 0.10, highlighting low leverage and financial stability. The equity ratio is robust at 72.17%, indicating a strong asset base supported by shareholder equity. Return on equity is healthy at 15.55% TTM, demonstrating efficient use of equity capital to generate profits.

Cash Flow

Cognizant's free cash flow generation remains strong with a TTM figure of $1.83 billion. The operating cash flow to net income ratio is solid at 0.95, indicating efficient translation of earnings into cash. However, free cash flow has decreased from the previous year, with a free cash flow growth rate of -9.22%, which may require attention if the trend continues.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
19.74B	19.35B	19.43B	18.51B	16.65B
	Gross Profit
6.78B	6.69B	6.98B	6.90B	5.98B
	EBIT
2.89B	2.69B	2.97B	2.83B	2.11B
	EBITDA
3.53B	3.35B	3.60B	3.41B	2.68B
	Net Income Common Stockholders
2.24B	2.13B	2.29B	2.14B	1.39B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
2.24B	2.63B	2.50B	2.72B	2.72B
	Total Assets
19.97B	18.48B	17.85B	17.85B	16.92B
	Total Debt
1.48B	1.31B	1.53B	1.64B	1.76B
	Net Debt
-751.00M	-1.31B	-657.00M	-150.00M	-922.00M
	Total Liabilities
5.56B	5.26B	5.54B	5.86B	6.09B
	Stockholders Equity
14.41B	13.23B	12.31B	11.99B	10.84B
Cash Flow		Free Cash Flow
1.83B	2.01B	2.24B	2.22B	2.90B
	Operating Cash Flow
2.12B	2.33B	2.57B	2.50B	3.30B
	Investing Cash Flow
-1.65B	-331.00M	-106.00M	-2.16B	-1.24B
	Financing Cash Flow
-915.00M	-1.61B	-1.94B	-1.20B	-2.01B

Cognizant Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 68.74
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CTSH, the sentiment is Negative. The current price of 68.74 is below the 20-day moving average (MA) of 77.80, below the 50-day MA of 81.91, and below the 200-day MA of 77.06, indicating a bearish trend. The MACD of -1.77 indicates Positive momentum. The RSI at 35.50 is Neutral, neither overbought nor oversold. The STOCH value of 18.25 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for CTSH.

Cognizant Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ACN	75 Outperform	$188.72B	24.88	27.26%	1.94%	4.10%	9.78%
INFY	75 Outperform	$72.86B	21.73	33.16%	2.50%	3.08%	11.92%
CTSH	72 Outperform	$36.24B	16.26	16.21%	1.76%	1.98%	7.16%
WIT	68 Neutral	$31.43B	27.26	16.59%	2.10%	-3.41%	67.87%
IBM	67 Neutral	$225.78B	37.89	24.14%	2.94%	1.45%	-20.56%
Sector *	57 Neutral	$18.57B	9.42	-13.42%	2.72%	5.01%	-23.43%
DXC	47 Neutral	$2.69B	267.98	-2.46%	―	-5.65%	78.20%

Cognizant Corporate Events

Cognizant Projects Steady Growth and Strategic Partnerships

Cognizant reported strong financial results for the fourth quarter and full-year 2024, with a revenue increase of 6.8% in the fourth quarter and 2.0% for the full year. The company noted a boost in bookings and strategic investments, particularly in AI-led platforms, contributing to its diversified portfolio and enhancing its market strategy. The company returned $1.2 billion to shareholders through share repurchases and dividends, with a 3% increase in dividends for Q1 2025. For 2025, Cognizant projects a revenue growth of 3.5% to 6.0% and an adjusted operating margin expansion of 20 to 40 basis points. Key developments included collaborations with Siemens for software-defined vehicle solutions and launching Stores 360 to improve retail operations.