Cognizant Technology Solutions Corp (CTSH, Financial) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $70.88, Cognizant Technology Solutions Corp has witnessed a daily gain of 0.9%, marked against a three-month change of 2.28%. A thorough analysis, underlined by the GF Score, suggests that Cognizant Technology Solutions Corp is well-positioned for substantial growth in the near future.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 9/10
- Profitability rank: 9/10
- Growth rank: 8/10
- GF Value rank: 6/10
- Momentum rank: 9/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With high ranks in financial strength, profitability, and momentum, and a slightly lower but still strong GF Value rank, GuruFocus assigned Cognizant Technology Solutions Corp the GF Score of 92 out of 100, which signals the highest outperformance potential.
Understanding Cognizant Technology Solutions Corp's Business
Cognizant Technology Solutions Corp, with a market cap of $35.54 billion and sales of $19.43 billion, operates with an operating margin of 14.61%. As a global IT services provider, Cognizant offers consulting and outsourcing services to some of the world's largest enterprises across various industries, including financial services, media and communications, healthcare, natural resources, and consumer products. Employing nearly 300,000 people globally, with approximately 70% based in India, Cognizant's headquarters are located in Teaneck, New Jersey.
Financial Strength Breakdown
According to the Financial Strength rating, Cognizant Technology Solutions Corp's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure. The Interest Coverage ratio for Cognizant Technology Solutions Corp stands impressively at 74.74, underscoring its strong capability to cover its interest obligations. This robust financial position resonates with the wisdom of legendary investor Benjamin Graham, who favored companies with an interest coverage ratio of at least 5. With an Altman Z-Score of 6.97, Cognizant Technology Solutions Corp exhibits a strong defense against financial distress, highlighting its robust financial stability. With a favorable Debt-to-Revenue ratio of 0.07, Cognizant Technology Solutions Corp's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows Cognizant Technology Solutions Corp's impressive standing among its peers in generating profit. Cognizant Technology Solutions Corp's strong Predictability Rank of 3.5 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, Cognizant Technology Solutions Corp demonstrates a strong commitment to expanding its business. The company's 3-Year Revenue Growth Rate is 7.7%, which outperforms 51.52% of companies in the Software industry. Moreover, Cognizant Technology Solutions Corp has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years. Specifically, the three-year growth rate stands at 7.9, and the rate over the past five years is 4.9. This trend accentuates the company's continued capability to drive growth.
Conclusion: Cognizant's Position for Outperformance
Considering Cognizant Technology Solutions Corp's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential outperformance. With a strong foundation and a clear trajectory for growth, Cognizant Technology Solutions Corp stands as a compelling choice for value investors. As the company continues to navigate the dynamic IT services landscape, its financial acumen and strategic growth initiatives position it well to capitalize on future opportunities. Will Cognizant Technology Solutions Corp continue to outperform the market and reward its investors? Only time will tell, but the indicators are certainly promising.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
