COGNIZANT TECH SOLUTIONS-A (CTSH) Stock Fundamental Analysis
NASDAQ:CTSH - Nasdaq - US1924461023 - Common Stock - Currency: USD
We assign a fundamental rating of 6 out of 10 to CTSH. CTSH was compared to 81 industry peers in the IT Services industry. Both the health and profitability get an excellent rating, making CTSH a very profitable company, without any liquidiy or solvency issues. CTSH is not valued too expensively and it also shows a decent growth rate.
1. Profitability
1.1 Basic Checks
CTSH had positive earnings in the past year.
In the past year CTSH had a positive cash flow from operations.
CTSH had positive earnings in each of the past 5 years.
Each year in the past 5 years CTSH had a positive operating cash flow.
1.2 Ratios
The Return On Assets of CTSH (11.80%) is better than 88.89% of its industry peers.
CTSH has a Return On Equity of 15.82%. This is in the better half of the industry: CTSH outperforms 75.31% of its industry peers.
With an excellent Return On Invested Capital value of 14.20%, CTSH belongs to the best of the industry, outperforming 85.19% of the companies in the same industry.
CTSH had an Average Return On Invested Capital over the past 3 years of 14.72%. This is significantly below the industry average of 21.85%.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 11.8% | ||
| ROE | 15.82% | ||
| ROIC | 14.2% |
ROA(3y)11.85%
ROA(5y)11.15%
ROE(3y)16.74%
ROE(5y)16.18%
ROIC(3y)14.72%
ROIC(5y)14.56%
1.3 Margins
CTSH has a Profit Margin of 11.73%. This is amongst the best in the industry. CTSH outperforms 86.42% of its industry peers.
In the last couple of years the Profit Margin of CTSH has remained more or less at the same level.
With an excellent Operating Margin value of 15.42%, CTSH belongs to the best of the industry, outperforming 82.72% of the companies in the same industry.
In the last couple of years the Operating Margin of CTSH has remained more or less at the same level.
Looking at the Gross Margin, with a value of 34.25%, CTSH is in line with its industry, outperforming 46.91% of the companies in the same industry.
In the last couple of years the Gross Margin of CTSH has remained more or less at the same level.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 15.42% | ||
| PM (TTM) | 11.73% | ||
| GM | 34.25% |
OM growth 3Y-0.1%
OM growth 5Y-0.74%
PM growth 3Y-0.57%
PM growth 5Y0.67%
GM growth 3Y-2.71%
GM growth 5Y-1.29%
2. Health
2.1 Basic Checks
With a Return on Invested Capital (ROIC) just above the Cost of Capital (WACC), CTSH is creating some value.
CTSH has less shares outstanding than it did 1 year ago.
Compared to 5 years ago, CTSH has less shares outstanding
The debt/assets ratio for CTSH is higher compared to a year ago.
2.2 Solvency
An Altman-Z score of 7.38 indicates that CTSH is not in any danger for bankruptcy at the moment.
CTSH has a Altman-Z score of 7.38. This is amongst the best in the industry. CTSH outperforms 82.72% of its industry peers.
CTSH has a debt to FCF ratio of 0.28. This is a very positive value and a sign of high solvency as it would only need 0.28 years to pay back of all of its debts.
CTSH has a Debt to FCF ratio of 0.28. This is amongst the best in the industry. CTSH outperforms 88.89% of its industry peers.
CTSH has a Debt/Equity ratio of 0.04. This is a healthy value indicating a solid balance between debt and equity.
CTSH's Debt to Equity ratio of 0.04 is fine compared to the rest of the industry. CTSH outperforms 76.54% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.04 | ||
| Debt/FCF | 0.28 | ||
| Altman-Z | 7.38 |
ROIC/WACC1.54
WACC9.23%
2.3 Liquidity
A Current Ratio of 2.22 indicates that CTSH has no problem at all paying its short term obligations.
CTSH's Current ratio of 2.22 is fine compared to the rest of the industry. CTSH outperforms 67.90% of its industry peers.
A Quick Ratio of 2.22 indicates that CTSH has no problem at all paying its short term obligations.
Looking at the Quick ratio, with a value of 2.22, CTSH is in the better half of the industry, outperforming 67.90% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 2.22 | ||
| Quick Ratio | 2.22 |
3. Growth
3.1 Past
The Earnings Per Share has been growing slightly by 6.58% over the past year.
Measured over the past 5 years, CTSH shows a small growth in Earnings Per Share. The EPS has been growing by 3.50% on average per year.
The Revenue has been growing slightly by 4.09% in the past year.
CTSH shows a small growth in Revenue. Measured over the last years, the Revenue has been growing by 3.29% yearly.
EPS 1Y (TTM)6.58%
EPS 3Y4.86%
EPS 5Y3.5%
EPS Q2Q%9.82%
Revenue 1Y (TTM)4.09%
Revenue growth 3Y2.17%
Revenue growth 5Y3.29%
Sales Q2Q%7.46%
3.2 Future
Based on estimates for the next years, CTSH will show a small growth in Earnings Per Share. The EPS will grow by 7.64% on average per year.
Based on estimates for the next years, CTSH will show a small growth in Revenue. The Revenue will grow by 5.22% on average per year.
EPS Next Y8.88%
EPS Next 2Y8.17%
EPS Next 3Y8.28%
EPS Next 5Y7.64%
Revenue Next Year5.47%
Revenue Next 2Y5.03%
Revenue Next 3Y5.49%
Revenue Next 5Y5.22%
3.3 Evolution
When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.
The Revenue growth rate is accelerating: in the next years the growth will be better than in the last years.
4. Valuation
4.1 Price/Earnings Ratio
CTSH is valuated correctly with a Price/Earnings ratio of 16.55.
Based on the Price/Earnings ratio, CTSH is valued a bit cheaper than 72.84% of the companies in the same industry.
CTSH is valuated rather cheaply when we compare the Price/Earnings ratio to 27.21, which is the current average of the S&P500 Index.
Based on the Price/Forward Earnings ratio of 14.47, the valuation of CTSH can be described as correct.
Based on the Price/Forward Earnings ratio, CTSH is valued a bit cheaper than 74.07% of the companies in the same industry.
When comparing the Price/Forward Earnings ratio of CTSH to the average of the S&P500 Index (21.70), we can say CTSH is valued slightly cheaper.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 16.55 | ||
| Fwd PE | 14.47 |
4.2 Price Multiples
Based on the Enterprise Value to EBITDA ratio, CTSH is valued cheaply inside the industry as 81.48% of the companies are valued more expensively.
77.78% of the companies in the same industry are more expensive than CTSH, based on the Price/Free Cash Flow ratio.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 18.58 | ||
| EV/EBITDA | 10.17 |
4.3 Compensation for Growth
The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates an expensive valuation of the company.
The decent profitability rating of CTSH may justify a higher PE ratio.
PEG (NY)1.86
PEG (5Y)4.73
EPS Next 2Y8.17%
EPS Next 3Y8.28%
5. Dividend
5.1 Amount
CTSH has a Yearly Dividend Yield of 1.60%. Purely for dividend investing, there may be better candidates out there.
Compared to an average industry Dividend Yield of 2.60, CTSH pays a better dividend. On top of this CTSH pays more dividend than 83.95% of the companies listed in the same industry.
Compared to the average S&P500 Dividend Yield of 2.42, CTSH is paying slightly less dividend.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 1.6% |
5.2 History
On average, the dividend of CTSH grows each year by 8.46%, which is quite nice.
CTSH has been paying a dividend for over 5 years, so it has already some track record.
As CTSH did not decrease their dividend in the past 5 years, we can say the dividend looks stable.
Dividend Growth(5Y)8.46%
Div Incr Years5
Div Non Decr Years7
5.3 Sustainability
25.63% of the earnings are spent on dividend by CTSH. This is a low number and sustainable payout ratio.
The dividend of CTSH is growing, but the earnings are growing slower. This means the dividend growth is not sustainable.
DP25.63%
EPS Next 2Y8.17%
EPS Next 3Y8.28%
80.44
+2.41 (+3.09%)
Chartmill FA Rating
GICS SectorInformation Technology
GICS IndustryGroupSoftware & Services
GICS IndustryIT Services
Earnings (Last)
Earnings (Next)
Inst Owners101.1%
Inst Owner Change1.36%
Ins Owners0.1%
Ins Owner Change1.89%
Market Cap39.65B
Analysts68.75
Price Target88.62 (10.17%)
Short Float %3.69%
Short Ratio5.07
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 1.6% |
Yearly Dividend1.21
Dividend Growth(5Y)8.46%
DP25.63%
Div Incr Years5
Div Non Decr Years7
Ex-Date
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)3.2%
Min EPS beat(2)0.64%
Max EPS beat(2)5.75%
EPS beat(4)4
Avg EPS beat(4)4.01%
Min EPS beat(4)0.64%
Max EPS beat(4)6.84%
EPS beat(8)7
Avg EPS beat(8)5.06%
EPS beat(12)9
Avg EPS beat(12)3.65%
EPS beat(16)12
Avg EPS beat(16)3.1%
Revenue beat(2)0
Avg Revenue beat(2)-1.79%
Min Revenue beat(2)-1.82%
Max Revenue beat(2)-1.76%
Revenue beat(4)0
Avg Revenue beat(4)-1.4%
Min Revenue beat(4)-1.82%
Max Revenue beat(4)-0.98%
Revenue beat(8)0
Avg Revenue beat(8)-1.48%
Revenue beat(12)0
Avg Revenue beat(12)-1.66%
Revenue beat(16)1
Avg Revenue beat(16)-1.52%
PT rev (1m)0.51%
PT rev (3m)-2.5%
EPS NQ rev (1m)0.16%
EPS NQ rev (3m)2.17%
EPS NY rev (1m)0.01%
EPS NY rev (3m)1.15%
Revenue NQ rev (1m)0%
Revenue NQ rev (3m)1.13%
Revenue NY rev (1m)-0.01%
Revenue NY rev (3m)0.55%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 16.55 | ||
| Fwd PE | 14.47 | ||
| P/S | 1.97 | ||
| P/FCF | 18.58 | ||
| P/OCF | 16.32 | ||
| P/B | 2.66 | ||
| P/tB | 6.26 | ||
| EV/EBITDA | 10.17 |
EPS(TTM)4.86
EY6.04%
EPS(NY)5.56
Fwd EY6.91%
FCF(TTM)4.33
FCFY5.38%
OCF(TTM)4.93
OCFY6.13%
SpS40.76
BVpS30.22
TBVpS12.86
PEG (NY)1.86
PEG (5Y)4.73
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 11.8% | ||
| ROE | 15.82% | ||
| ROCE | 18.71% | ||
| ROIC | 14.2% | ||
| ROICexc | 16.14% | ||
| ROICexgc | 39.14% | ||
| OM | 15.42% | ||
| PM (TTM) | 11.73% | ||
| GM | 34.25% | ||
| FCFM | 10.62% |
ROA(3y)11.85%
ROA(5y)11.15%
ROE(3y)16.74%
ROE(5y)16.18%
ROIC(3y)14.72%
ROIC(5y)14.56%
ROICexc(3y)17.57%
ROICexc(5y)17.67%
ROICexgc(3y)42.32%
ROICexgc(5y)42.39%
ROCE(3y)19.4%
ROCE(5y)19.19%
ROICexcg growth 3Y-3.2%
ROICexcg growth 5Y-0.62%
ROICexc growth 3Y-4.44%
ROICexc growth 5Y-4.72%
OM growth 3Y-0.1%
OM growth 5Y-0.74%
PM growth 3Y-0.57%
PM growth 5Y0.67%
GM growth 3Y-2.71%
GM growth 5Y-1.29%
F-Score6
Asset Turnover1.01
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.04 | ||
| Debt/FCF | 0.28 | ||
| Debt/EBITDA | 0.16 | ||
| Cap/Depr | 54.13% | ||
| Cap/Sales | 1.47% | ||
| Interest Coverage | 250 | ||
| Cash Conversion | 66.66% | ||
| Profit Quality | 90.54% | ||
| Current Ratio | 2.22 | ||
| Quick Ratio | 2.22 | ||
| Altman-Z | 7.38 |
F-Score6
WACC9.23%
ROIC/WACC1.54
Cap/Depr(3y)56.75%
Cap/Depr(5y)58.01%
Cap/Sales(3y)1.62%
Cap/Sales(5y)1.75%
Profit Quality(3y)91.3%
Profit Quality(5y)117.2%
High Growth Momentum
Growth
EPS 1Y (TTM)6.58%
EPS 3Y4.86%
EPS 5Y3.5%
EPS Q2Q%9.82%
EPS Next Y8.88%
EPS Next 2Y8.17%
EPS Next 3Y8.28%
EPS Next 5Y7.64%
Revenue 1Y (TTM)4.09%
Revenue growth 3Y2.17%
Revenue growth 5Y3.29%
Sales Q2Q%7.46%
Revenue Next Year5.47%
Revenue Next 2Y5.03%
Revenue Next 3Y5.49%
Revenue Next 5Y5.22%
EBIT growth 1Y5.62%
EBIT growth 3Y2.07%
EBIT growth 5Y2.53%
EBIT Next Year28.94%
EBIT Next 3Y13.35%
EBIT Next 5Y9.47%
FCF growth 1Y-20.4%
FCF growth 3Y-6.23%
FCF growth 5Y-2.81%
OCF growth 1Y-18.79%
OCF growth 3Y-5.22%
OCF growth 5Y-3.2%