Cognizant Technology Solutions Corp (CTSH) stock analysis

P/E below its 5-year median

Cognizant Technology Solutions's P/E of 11.8 is below its own 5-year median of 16.1.

P/E below the industry

Cognizant Technology Solutions's P/E of 11.8 is below the Computer Programming, Data Processing, and Other Computer Related Services median of 27.6.

EV/EBITDA below its 5-year median

Cognizant Technology Solutions's EV/EBITDA of 7.2 is below its 5-year median of 9.8.

P/B below the industry

Cognizant Technology Solutions's price-to-book of 1.96 is below the Computer Programming, Data Processing, and Other Computer Related Services median of 3.32.

Trading below fair value

The share price of $64.43 is below our fair value estimate of $109.97.

Margin of safety over 20%

The price is 41.4% below fair value, more than the 20% cushion we look for.

Revenue growing under 10% a year

Revenue grew 2.8% a year over the last three fiscal years, short of the 10% we look for.

EPS growing under 10% a year

Diluted EPS grew 1.1% a year over the last three fiscal years.

Earnings growth accelerating

Net income grew 20.9% over the last twelve months, against a 5-year average of 9.9% a year.

Growing slower than the industry

Revenue grew 5.0% over the last twelve months; the Computer Programming, Data Processing, and Other Computer Related Services median is 9.6%.

Guidance lowered

Cognizant Technology Solutions lowered its Full-year 2026 revenue outlook on Jul 29, 2026.

Gross margin slipping

Gross margin was 33.4% over the last twelve months, against 34.1% a year earlier.

Return on equity over 15%

Return on equity was 17.4% over the last twelve months and averaged 17.1% over five years.

Return on capital over 10%

Return on invested capital was 18.3%, above the 10% that usually covers the cost of capital.

Return on equity above the industry

Cognizant Technology Solutions's return on equity of 17.4% is above the Computer Programming, Data Processing, and Other Computer Related Services median of -1.2%.

Earnings grew over 5 years

Net income grew 9.9% a year on average over the last five fiscal years.

Net margin above its 5-year average

Net margin was 11.8% over the last twelve months, against a 5-year average of 11.2%.

Net margin above the industry

Cognizant Technology Solutions's net margin of 11.8% is above the Computer Programming, Data Processing, and Other Computer Related Services median of -4.8%.

Low debt

Debt is 10.5% of shareholders' equity, under the 40% we consider low.

Debt rising against equity

Debt to equity rose from 6.5% five years ago to 10.5%.

Debt covered by cash flow

Operating cash flow over the last twelve months equals 174% of total debt.

Interest well covered

Operating income covers interest expense 73.2 times.

Short-term assets cover short-term debts

Current assets are 2.22 times current liabilities.

Low bankruptcy risk

The Altman Z-score is 5.41; above 3 is the safe zone and below 1.8 the distress zone.

Pays a dividend

Cognizant Technology Solutions paid dividends worth 2.0% of the share price over the last twelve months.

Yield below Treasuries

The 2.0% yield is below the 4.4% on a 1-year Treasury.

Yield below the top quarter

The top quarter of US dividend payers yield 3.8% or more; Cognizant Technology Solutions yields 2.0%.

Dividend not cut

The dividend per share has not fallen by more than 10% in any of the last 9 fiscal years.

Covered by earnings

Dividends take 23.9% of net income.

Covered by free cash flow

Dividends take 26.1% of free cash flow.