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Cognizant Technology Solutions (CTSH)
NASDAQ:CTSH
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Cognizant
(NASDAQ:CTSH)
76Outperform
Positive Factors
Deal Momentum
Strong deal momentum continues, signing ten deals in 4Q24 with a total contract value of USD100mn or more.
Earnings and Guidance
Cognizant Technology Solutions posted solid first quarter results that came in above Street expectations due to better execution and broad-based improvement in growth.
Strategic Investments
AI initiatives and the NextGen program are driving future growth, with investments in GenAI capabilities yielding results and expanding operating margins.
Negative Factors
Client Decision-Making
A slowdown in client decision-making and discretionary spend began due to macro.
Financial Services Segment
Continuous downturn in the financial services segment poses a risk due to decreased discretionary spending on small deals.
Global Economic Concerns
The potential global recession could disrupt business activities, potentially leading to layoffs and impacting growth.
Cognizant (CTSH) vs. S&P 500 (SPY)
Market Cap
$40.15B
Dividend Yield1.49%
Average Volume (3M)4.04M
Price to Earnings (P/E)17.1
Beta (1Y)0.87
Revenue Growth4.09%
EPS Growth14.05%
CountryUS
Employees336,300
SectorTechnology
Sector Strength76
IndustryInformation Technology Services
Share Statistics
EPS (TTM)1.23
Shares Outstanding492,941,960
10 Day Avg. Volume3,248,317
30 Day Avg. Volume4,035,699
Financial Highlights & Ratios
PEG Ratio3.12
Price to Book (P/B)2.63
Price to Sales (P/S)0.00
P/FCF Ratio18.29
Enterprise Value/Market Cap0.95
Enterprise Value/Revenue0.49
Enterprise Value/Gross Profit5.77
Enterprise Value/Ebitda2.67
Forecast
1Y Price Target
$87.00Price Target Upside6.83% Upside
Rating ConsensusHold
Number of Analyst Covering16
Cognizant Business Overview & Revenue Model
Company DescriptionCognizant Technology Solutions Corporation, a professional services company, provides consulting and technology, and outsourcing services in North America, Europe, and internationally. It operates through four segments: Financial Services; Healthcare; Products and Resources; and Communications, Media and Technology. The company offers customer experience enhancement, robotic process automation, analytics, and AI services in areas, such as digital lending, fraud detection, and next generation payments; the shift towards consumerism, outcome-based contracting, digital health, delivering integrated seamless, omni-channel, and patient-centered experience; and services that drive operational improvements in areas, such as clinical development, pharmacovigilance, and manufacturing, as well as claims processing, enrollment, membership, and billing to healthcare providers and payers, and life sciences companies, including pharmaceutical, biotech, and medical device companies. It also provides solution to manufacturers, retailers and travel and hospitality companies, as well as companies providing logistics, energy and utility services; and digital content, the creation of personalized user experience, and acceleration of digital engineering services to information, media and entertainment, and communications and technology companies. The company was founded in 1994 and is headquartered in Teaneck, New Jersey.
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 Key Performance Indicators (KPIs)
Any
Revenue by Service Line
Analyzes revenue from different service lines, indicating which areas are driving growth and where the company might be focusing its strategic efforts.
Analyzes revenue from different service lines, indicating which areas are driving growth and where the company might be focusing its strategic efforts.
Data provided by:
Main Street Data
Main Street DataCognizant Financial Statement Overview
Summary
Cognizant exhibits strong financial health with consistent revenue growth, robust profitability margins, a solid balance sheet with low leverage, and strong cash flow generation. The revenue growth rate is moderate at 1.8%, but the company's profitability metrics are strong, with a net profit margin of 11.73%. The cash flow is notably strong, with a free cash flow growth rate of 16.77%.Income Statement
Cognizant has shown consistent revenue growth, with a TTM revenue of $20.09 billion compared to $19.74 billion in the previous year, marking a growth rate of 1.8%. The gross profit margin stands at 32.95%, indicating efficient cost management. Net profit margin has also remained strong at 11.73%, reflecting solid profitability. The EBIT and EBITDA margins are robust at 15.33% and 16.13%, respectively, showcasing operational efficiency.85
Very Positive
Balance Sheet
The balance sheet reveals a strong equity position with a debt-to-equity ratio of 0.08, suggesting low leverage and financial stability. The return on equity (ROE) is a healthy 15.82%, indicating effective use of equity to generate profits. The equity ratio is 74.60%, highlighting a strong capital structure with significant equity backing.78
Positive
Cash Flow
Cognizant's cash flow is robust, with a TTM operating cash flow of $2.43 billion translating to an operating cash flow to net income ratio of 1.03. The free cash flow growth rate has been 16.77% year-over-year, demonstrating strong cash generation. The free cash flow to net income ratio of 0.90 reflects solid conversion of profits into cash.80
Positive
| Breakdown | |||||
| TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 20.09B | 19.74B | 19.35B | 19.43B | 18.51B | 16.65B | Gross Profit |
| 6.62B | 6.78B | 6.69B | 6.98B | 6.90B | 5.98B | EBIT |
| 3.08B | 2.89B | 2.69B | 2.97B | 2.83B | 2.11B | EBITDA |
| 3.69B | 3.52B | 3.35B | 3.60B | 3.41B | 2.68B | Net Income Common Stockholders |
| 2.36B | 2.24B | 2.13B | 2.29B | 2.14B | 1.39B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 1.99B | 2.24B | 2.63B | 2.50B | 2.72B | 2.72B | Total Assets |
| 19.97B | 19.97B | 18.48B | 17.85B | 17.85B | 16.92B | Total Debt |
| 1.18B | 1.48B | 1.31B | 1.53B | 1.64B | 1.76B | Net Debt |
| -801.00M | -751.00M | -1.31B | -657.00M | -150.00M | -922.00M | Total Liabilities |
| 5.07B | 5.56B | 5.26B | 5.54B | 5.86B | 6.09B | Stockholders Equity |
| 14.90B | 14.41B | 13.23B | 12.31B | 11.99B | 10.84B |
| Cash Flow | Free Cash Flow | ||||
| 2.13B | 1.83B | 2.01B | 2.24B | 2.22B | 2.90B | Operating Cash Flow |
| 2.43B | 2.12B | 2.33B | 2.57B | 2.50B | 3.30B | Investing Cash Flow |
| -1.42B | -1.65B | -331.00M | -106.00M | -2.16B | -1.24B | Financing Cash Flow |
| -1.27B | -915.00M | -1.61B | -1.94B | -1.20B | -2.01B |
Cognizant Technical Analysis
Positive
81.44
Price Trends
75.82
Positive
78.72
Positive
77.68
Positive
Market Momentum
2.00
Negative
67.08
Neutral
82.53
Negative
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 81.44 is above the 20-day moving average (MA) of 76.18, above the 50-day MA of 75.82, and above the 200-day MA of 77.68, indicating a bullish trend. The MACD of 2.00 indicates Negative momentum. The RSI at 67.08 is Neutral, neither overbought nor oversold. The STOCH value of 82.53 is Negative, 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 (60)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
81 Outperform | $77.15B | 24.00 | 29.00% | 2.27% | 3.85% | -0.38% | |
77 Outperform | $198.88B | 26.21 | 27.26% | 1.80% | 4.10% | 9.78% | |
76 Outperform | $40.15B | 17.13 | 16.61% | 1.49% | 4.09% | 14.05% | |
74 Outperform | $34.50B | 27.88 | 113.19% | ― | 5.99% | 59.74% | |
71 Outperform | $10.40B | 25.67 | 11.57% | ― | 4.72% | -3.06% | |
67 Neutral | $31.10B | 19.92 | 16.91% | 2.08% | -2.83% | 106.18% | |
60 Neutral | $11.59B | 10.44 | -7.23% | 2.94% | 7.46% | -10.66% |
* Technology Sector Average
Performance Comparison
CTSH
Cognizant
81.44
12.64
18.37%
ACN
Accenture
317.69
17.33
5.77%
EPAM
Epam Systems
183.60
-7.90
-4.13%
IT
Gartner
448.29
-8.01
-1.76%
INFY
Infosys
18.31
1.65
9.90%
WIT
Wipro
2.96
0.31
11.70%
Cognizant Earnings Call Summary
Earnings Call Date:Apr 30, 2025
(Q1-2025)
| % Change Since: 10.70%|
Next Earnings Date:Jul 23, 2025
Earnings Call Sentiment Positive
Cognizant Technology Solutions reported strong revenue growth and positive performance in key segments like Health Sciences and Financial Services. The company is benefiting from strategic investments in AI and technology, as well as strong bookings and a healthy pipeline. However, there is some concern about the slowdown in client decision-making and discretionary spending, particularly in April. Despite these challenges, the company's overall outlook remains positive.Q1-2025 Updates
Positive Updates
Strong Revenue Growth
First quarter revenue grew by 8.2% year-over-year in constant currency to $5.1 billion, driven by the Belcan acquisition and organic growth in Health Sciences and Financial Services.
Health Sciences and Financial Services Performance
Health Sciences led revenue growth with over 11% increase year-over-year in constant currency. Financial Services segment grew 6.5% year-over-year in constant currency.
Adjusted Operating Margin Improvement
Adjusted operating margin of 15.5% improved by 40 basis points year-over-year.
Earnings Per Share Growth
Adjusted EPS grew 10% year-over-year, marking the sixth consecutive quarter of year-over-year growth.
AI and Technology Investments
The company is heavily investing in AI-powered software, with 1,400 early GenAI engagements and numerous partnerships with companies like NVIDIA to accelerate AI adoption.
Strong Bookings and Pipeline
On a trailing 12-month basis, bookings grew 3% year-over-year to $26.7 billion, representing a 1.3x book-to-bill ratio.
Negative Updates
April Slowdown in Decision-Making
In April, the company began to see some slowdown in client decision-making and discretionary spending, particularly in health sciences and products and resources segments.
Discretionary Spending Pressure
Products and Resources segment faced weak demand due to discretionary spending pressure and impacts from changes in tariff policies.
Bookings Decline
First quarter bookings declined 7% year-over-year, driven by a decline in the rest of the world region.
Company Guidance
During the Cognizant Technology Solutions Q1 2025 earnings call, the company provided optimistic guidance based on several key metrics. Revenue for the first quarter grew by 8.2% year-over-year in constant currency to $5.1 billion, driven significantly by the Belcan acquisition and organic growth in Health Sciences and Financial Services. Health Sciences saw an impressive 11% year-over-year increase, while Financial Services grew by 6.5%. The adjusted operating margin improved by 40 basis points to 15.5%, and adjusted EPS grew by 10% year-over-year. The company reported a healthy book-to-bill ratio of 1.3x on a trailing 12-month basis, indicating a robust backlog. Additionally, Cognizant highlighted its focus on AI-led productivity, with AI-written code comprising over 20% of their output, and noted that they are currently engaged in approximately 1,400 early GenAI projects. For the full year 2025, the company expects revenue growth of 3.5% to 6% in constant currency, despite acknowledging macroeconomic uncertainties that have impacted client decision-making and discretionary spending.Cognizant Corporate Events
Stock BuybackDividendsBusiness Operations and StrategyFinancial Disclosures
Cognizant Reports Strong Q1 2025 Financial Results
Positive
Apr 30, 2025
Cognizant reported strong financial results for the first quarter of 2025, with revenue reaching $5.1 billion, a 7.5% increase year-over-year, and an operating margin of 16.7%. The company also announced a 22% increase in GAAP EPS and a 10% rise in adjusted EPS. Cognizant’s strategic focus on AI-led transformation and operational efficiency has positioned it well in the market, as evidenced by significant client agreements and platform enhancements. The company plans to return $1.7 billion to shareholders in 2025 through buybacks and dividends, while maintaining flexibility for growth investments.
Spark’s Take on CTSH Stock
According to Spark, TipRanks’ AI Analyst, CTSH is a Outperform.
Cognizant’s stock is supported by strong financial performance and positive earnings call insights, offset by weaker technical indicators. Valuation is reasonable, but caution is advised due to bearish momentum.
To see Spark’s full report on CTSH stock, click here.
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.