We've been asking ourselves recently if the market has placed a fair valuation on Cognizant Technology Solutions. Let's dive into some of the fundamental values of this large-cap Technology company to determine if there might be an opportunity here for value-minded investors.
Cognizant Technology Solutions Is Potentially Undervalued and Trades Below Its Graham Number:
Cognizant Technology Solutions Corporation, a professional services company, provides consulting and technology, and outsourcing services in North America, Europe, and internationally. The company belongs to the Technology sector, which has an average price to earnings (P/E) ratio of 35.0 and an average price to book (P/B) ratio of 7.92. In contrast, Cognizant Technology Solutions has a trailing 12 month P/E ratio of 18.6 and a P/B ratio of 2.94.
Cognizant Technology Solutions's PEG ratio is 3.88, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
The Company Has a Positive Net Current Asset Value:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $16,125 | $16,783 | $16,652 | $18,507 | $19,428 | $19,434 |
| Revenue Growth | n/a | 4.08% | -0.78% | 11.14% | 4.98% | 0.03% |
| Operating Margins | 17% | 15% | 13% | 15% | 15% | 14% |
| Net Margins | 13% | 11% | 8% | 12% | 12% | 11% |
| Net Income (MM) | $2,101 | $1,842 | $1,392 | $2,137 | $2,290 | $2,089 |
| Net Interest Expense (MM) | $27 | $26 | $24 | $9 | $19 | $38 |
| Depreciation & Amort. (MM) | $498 | $507 | $552 | $574 | $569 | $533 |
| Earnings Per Share | $3.6 | $3.29 | $2.57 | $4.05 | $4.41 | $4.1 |
| EPS Growth | n/a | -8.61% | -21.88% | 57.59% | 8.89% | -7.03% |
| Diluted Shares (MM) | 584 | 560 | 541 | 528 | 519 | 505 |
| Free Cash Flow (MM) | $2,215 | $2,107 | $2,901 | $2,216 | $2,236 | $1,966 |
| Capital Expenditures (MM) | $377 | $392 | $398 | $279 | $332 | $329 |
| Current Ratio | 3.18 | 2.55 | 1.94 | 2.08 | 2.17 | 2.23 |
