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Cognizant Technology Solutions (CTSH)
NASDAQ:CTSH
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Cognizant
(NASDAQ:CTSH)80Outperform
Positive Factors
AI Initiatives
Cognizant's focus on embracing generative AI is evident, with early AI client engagements increasing significantly, indicating potential for improved efficiencies.
Earnings
Cognizant raised its adjusted EPS estimates due to a better operating margin outlook, reflecting operational improvements.
Negative Factors
Growth Outlook
Despite recent large deal wins and healthy bookings growth, the 2025 revenue guidance suggests only modest acceleration, indicating a conservative growth outlook.
Cognizant (CTSH) vs. S&P 500 (SPY)
Market Cap
$41.42B
Dividend Yield1.44%
Average Volume (3M)3.86M
Price to Earnings (P/E)18.6
Beta (1Y)0.82
Revenue Growth1.98%
EPS Growth7.16%
CountryUS
Employees336,800
SectorTechnology
Sector Strength48
IndustrySoftware
Share Statistics
EPS (TTM)4.51
Shares Outstanding494,615,500
10 Day Avg. Volume4,429,808
30 Day Avg. Volume3,855,868
Financial Highlights & Ratios
PEG Ratio2.59
Price to Book (P/B)N/A
Price to Sales (P/S)2.09
Price to Cash Flow (P/CF)11.20
P/FCF Ratio11.20
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$90.91Price Target Upside7.87% Upside
Rating ConsensusHold
Number of Analyst Covering12
Cognizant Business Overview & Revenue Model
Company DescriptionIncorporated in 1994 and based in New Jersey, Cognizant Technology Solutions Corp. is a professional services company, which provides information technology, consulting, and business process outsourcing services. It operates through four business segments: Financial Services; Healthcare; Products and Resources; and Communications, Media, and Technology.
How the Company Makes MoneyCognizant 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 company's 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. Overall, Cognizant is well-positioned within the software industry, benefiting from operational efficiencies and financial stability.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.85
Very Positive
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.88
Very Positive
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.82
Very Positive
| 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
Positive
84.28
Price Trends
81.53
Positive
79.74
Positive
75.72
Positive
Market Momentum
0.47
Positive
50.90
Neutral
26.82
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CTSH, the sentiment is Positive. The current price of 84.28 is below the 20-day moving average (MA) of 85.98, above the 50-day MA of 81.53, and above the 200-day MA of 75.72, indicating a neutral trend. The MACD of 0.47 indicates Positive momentum. The RSI at 50.90 is Neutral, neither overbought nor oversold. The STOCH value of 26.82 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for CTSH.
Cognizant Risk Analysis
Cognizant disclosed 14 risk factors in its most recent earnings report. Cognizant reported the most risks in the “Legal & Regulatory” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Cognizant Peers Comparison
Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | $41.42B | 18.58 | 15.55% | 1.44% | 1.98% | 7.16% | |
76 Outperform | $217.98B | 29.21 | 25.93% | 1.60% | 2.75% | 10.53% | |
75 Outperform | $80.41B | 24.69 | 29.99% | 2.10% | 3.08% | 11.92% | |
68 Neutral | $33.55B | 30.07 | 14.73% | 1.91% | -3.41% | 67.87% | |
67 Neutral | $234.79B | 39.40 | 22.06% | 2.67% | 1.45% | -20.56% | |
59 Neutral | $22.39B | 11.53 | -18.05% | 2.31% | 5.00% | -25.89% | |
47 Neutral | $3.26B | 267.98 | -2.51% | ― | -5.65% | 78.20% |
* Technology Sector Average
Performance Comparison
CTSH
Cognizant
84.28
8.78
11.63%
ACN
Accenture
348.26
-26.32
-7.03%
INFY
Infosys
20.06
1.26
6.70%
IBM
International Business Machines
251.35
61.57
32.44%
WIT
Wipro
3.32
0.32
10.67%
DXC
DXC Technology
18.22
-2.16
-10.60%
Cognizant Earnings Call Summary
Earnings Call Date: Feb 5, 2025 | % Change Since: 1.16% | Next Earnings Date: Apr 30, 2025
Earnings Call Sentiment Positive
The earnings call reflected a strong overall performance with significant revenue growth, successful strategic acquisitions, and expansion of AI capabilities. The company demonstrated resilience and optimism in overcoming challenges, such as segment pressures and currency headwinds, while maintaining a positive outlook for 2025.Highlights
Strong Revenue Growth
Cognizant reported Q4 revenue of $5.1 billion, up 6.7% year-over-year in constant currency, with Health Sciences leading with over 10% growth.
Large Deal Momentum
The company signed 10 large deals in Q4, up from 7 a year ago, bringing the total to 29 in 2024 compared to 17 in 2023.
Successful Strategic Acquisitions
Cognizant acquired Thirdera and Belcan, contributing significantly to market presence, with Belcan strengthening opportunities in the $190 billion ER&D market.
Growing AI Capabilities
Introduced AI platforms like Flowsource and Neuro AI, completed 1,200 AI engagements, and expanded AI use cases across industries.
Improved Client Satisfaction and Employee Engagement
NPS client satisfaction scores reached a historic high, with high employee engagement and low voluntary attrition.
Positive Financial Outlook for 2025
Forecasted revenue growth of 2.6% to 5.1% for 2025, with adjusted operating margins of 15.5% to 15.7%.
Lowlights
Pressure in Products & Resources Segment
Products & Resources segment faced pressure due to a cautious discretionary environment across end markets, including automotive, aerospace, and manufacturing.
Currency Exchange Rate Headwinds
Expected headwinds from unfavorable foreign currency exchange rates impacting reported revenue and below-the-line items, including higher tax rates.
Free Cash Flow Impacted by Tax Dispute
Free cash flow for the year was negatively impacted by a $360 million payment to Indian tax authorities related to a 2016 tax matter.
Company Guidance
In the fourth quarter of 2024, Cognizant Technology Solutions reported revenue of $5.1 billion, marking a 6.7% year-over-year growth in constant currency. The company successfully signed 10 large deals, bringing the total for the year to 29, up from 17 in 2023. Health Sciences led with over 10% revenue growth, while Financial Services also showed solid performance. Cognizant's adjusted operating margin improved sequentially to 15.7%, with full-year revenue reaching $19.7 billion, a 1.9% increase year-over-year in constant currency. The acquisitions of Thirdera and Belcan contributed approximately 450 basis points to the year-over-year growth in Q4. The company also achieved historic highs in NPS client satisfaction scores and maintained low voluntary attrition. Looking ahead to 2025, Cognizant expects revenue growth of 2.6% to 5.1% and aims for adjusted operating margins between 15.5% and 15.7%.Cognizant Corporate Events
Stock BuybackDividendsBusiness Operations and StrategyFinancial Disclosures
Cognizant Projects Steady Growth and Strategic Partnerships
Positive
Feb 5, 2025
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.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.