Today we’re going to take a look at the well-established Cognizant Technology Solutions Corporation (NASDAQ:CTSH). The company’s stock saw a decent share price growth of 12% on the NASDAQGS over the last few months. The company’s trading levels have approached the yearly peak, following the recent bounce in the share price. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on Cognizant Technology Solutions’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for Cognizant Technology Solutions
Good news, investors! Cognizant Technology Solutions is still a bargain right now according to our price multiple model, which compares the company’s price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. we find that Cognizant Technology Solutions’s ratio of 18.41x is below its peer average of 44.91x, which indicates the stock is trading at a lower price compared to the IT industry. However, given that Cognizant Technology Solutions’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. Cognizant Technology Solutions’ earnings over the next few years are expected to increase by 30%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
Are you a shareholder? Since CTSH is currently below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.