CTSH Stock Study (6-10-26)
Posted by Mark on November 14, 2025 at 06:59 | Last modified: June 10, 2026 07:31I recently studied Cognizant Technology Solns Corp. (CTSH, $52.94). Previous studies are here, here, here, here, and here.
M* writes:
> Cognizant Technology Solutions is a multinational IT services provider
> that offers a range of consulting and business process outsourcing
> services. Originally founded in India, the company is headquartered in
> the US and serves enterprise customers spanning the financial services,
> healthcare, and resources industries. With most of its workforce
> located in India, Cognizant leverages a global delivery model that
> helps clients outsource their IT needs to offshore labor.
Over the past 10 years, this large-size company has grown sales and earnings 4.6% and 7.1% per year, respectively. Lines are somewhat up, straight, and parallel with YOY sales dips in ’20 and ’23 along with EPS dips in ’17, ’19, ’23, and a larger decline in ’20. Five- (10-) year EPS R^2 is 0.68 (0.72) and Value Line (VL) gives an Earnings Predictability score of 95. Shares outstanding decrease 19.8% (2.4%/year).
Over the past 10 years, PTPM leads peer and industry averages despite decreasing from 17.5% to 16.5% (’25) with a last-5-year mean of 15.3%. ROE trails peer and industry averages while ranging from 12.2% in ’20 to 18.9% in ’18 with a last-5-year mean of 16.7% (shareholder equity consistently positive with 3.8% CAGR). Debt-to-Capital is much less than peer and industry averages while ranging from 6.1% in ’18 to 14.0% in ’20 with a last-5-year mean of 9.7%.
Quick ratio is 1.7 and interest coverage 109 per M* who assigns “Narrow” Economic Moat, gives a “Standard” rating for Capital Allocation, and a B grade for Financial Health (per BI website). VL gives an A+ grade for Financial Strength.
With regard to sales growth:
- YF gives YOY ACE 5.7% and 5.0% for ’26 and ’27, respectively (based on 29 analysts).
- Zacks gives YOY ACE 5.7% and 5.8% for ’26 and ’27 (8 analysts).
- VL projects 4.3% per year from ’25-’30.
- CFRA projects 5.9% YOY and 6.1% per year for ’26 and ’25-’27, respectively.
- M* gives 2-year ACE of 4.9% per year and projects 5-year CAGR of 4.4% in Equity Report.
My 4.0% per year forecast is below the range.
With regard to EPS growth:
- MarketWatch gives ACE 8.9% and 8.6% per year for ’25-’27 and ’25-’28, respectively (based on 31 analysts).
- Nasdaq.com gives YOY ACE 8.9% and 9.7% per year for ’27 and ’26-’28 (9 / 9 / 4 analysts for ’26 / ’27 / ’28).
- Seeking Alpha projects 4-year CAGR of 7.4%.
- Finviz gives 5-year annualized ACE of 9.1% (10).
- Argus projects 5-year CAGR of 10.0%.
- LSEG has LTG at 8.3%.
- YF gives YOY ACE 7.6% and 8.4% for ’26 and ’27, respectively (30).
- Zacks gives YOY ACE 7.9% and 8.9% for ’26 and ’27 along with 5-year CAGR of 8.3% (9).
- VL projects 6.7% per year from ’25-’30.
- CFRA projects 8.3% YOY and 8.2% per year for ’26 and ’25-’27 along with 3-year CAGR of 9.0%.
- M* gives long-term ACE 10.7% and projects 5-year CAGR of 7.5% (lower of GAAP/adjusted) in Equity Report.
My 6.0% forecast is below the long-term-estimate range (mean of eight: 8.5%). Initial value is ’25 EPS of $4.56/share rather than 2026 Q1 EPS of $4.60 (TTM).
My Forecast High P/E is 18.0. Over the past decade, high P/E decreases from 24.9 to 19.9 (’25) with last-5-year mean of 20.0 and a last-5-year-mean average P/E of 17.0. I am below the range.
My Forecast Low P/E is 9.0. Over the past decade, low P/E decreases from 17.8 to 14.3 (’25) with a last-5-year mean of 14.0. I am forecasting below the range.
My Low Stock Price Forecast (LSPF) of $41.00 is default based on initial value from above: 22.6% less than previous close and 9.9% less than the 52-week low.
Since 2017, Payout Ratio (PR) increases from 17.8% to 27.2% (’25) with a last-5-year mean of 25.9%. I am forecasting conservatively below the range at 17.0%.
These inputs land CTSH in the BUY zone with a U/D ratio of 4.8. Total Annualized Return (TAR) is 16.7%.
PAR (using Forecast Average—not High—P/E) of 10.5% is less than I seek for a large-size company. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on TAR instead.
To assess MOS, I start by comparing my inputs with those of Member Sentiment (MS). Based on 65 studies done in the past 90 days (28 outliers including my own excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 5.2%, 8.0%, 19.0, 13.2, and 25.9%, respectively. I am lower across the board. VL projects a future average P/E of 17.0 that is greater than MS (16.1) and greater than mine (13.5).
MS high / low EPS are $6.79 / $4.54 versus my $6.10 / $4.56 (per share). My high EPS is less due to a lower growth rate. VL (M*) high EPS of $7.30 ($7.55) is greater than both.
MS LSPF of $45.60 implies a Forecast Low P/E of 10.0: less than the above-stated 13.2. MS LSPF is 23.9% less than the default $4.54/share * 13.2 = $59.93 resulting in more conservative zoning. MS LSPF is 11.2% greater than mine, though.
MOS is robust in the study because my inputs are near or less than historical/analyst/MS averages/ranges. MS TAR exceeding mine by 3.6% supports the assessment along with my lower LSPF.
With regard to valuation, PEG is 1.1 and 1.8 per Zacks and my projected P/E: fairly valued (M* has 1.2). Relative Value [(current P/E) / 5-year-mean average P/E] is low at 0.7. “Quick and Dirty” DCF method has stock undervalued by 44% while M* (CFRA) reports the stock at a 36% (1.4%) discount.
With historical growth falling to the mid-single digits, this is no longer a high-quality growth stock. I’d like to see a higher CAGR for shareholder equity. The company seems to have done a nice job of buying back shares—likely at levels below intrinsic value because the stock has languished for years.
Per U/D, CTSH is a BUY right now under $58/share. Given a forecast high price ~$110, the BetterInvesting® TAR criterion is met [109.8 / ((13.97 / 100 ) +1 ) ^ 5] ~ $57.
A 90-day free trial to BetterInvesting® may be secured here (also see link under “Pages” section at top right of this page).
Categories: BetterInvesting® | Comments (0) | PermalinkThe Revenge Trade
Posted by Mark on November 6, 2025 at 07:16 | Last modified: April 9, 2026 07:53I mentioned revenge trading in the the sixth paragraph of [Epic Fury] Part 9. Today I want to fully discuss the concept.
Google AI defines revenge trading as an impulsive, emotionally driven behavior where one attempts to quickly recover from a significant loss by entering new, often larger, trades without a clear strategy. The behavior is frequently compared to going “on tilt” in poker, where frustration replaces logic and leads to reckless decision-making.
Breaking it down further, revenge trading:
- Is motivated by anger, fear, or a desire to “beat the market” rather than objective analysis.
- Increases risk by doubling or tripling position size to recoup losses faster.
- Involves taking consecutive, “rapid-fire” trades without waiting for valid setups.
- Typically ignores predefined risk management such as stop-losses and trade plans.
Psychologically, revenge trading may occur for a few different reasons:
- Pain of loss may be felt twice as strongly as joy of equivalent gain creating urgent biological need to “fix” the situation.
- Ego leads traders to feel personally slighted by the market with a subsequent desire to prove being “right” rather than admitting a mistake.
- Gambler’s fallacy is the mistaken belief that a big win is “due” after several losses.
- The illusion of control means taking any action, even a poor one, feels better than sitting helpless with a loss.
If revenge trading becomes a continuing problem, then the trading plan should be altered to prevent it. Incorporate mandatory cooldowns by physically walking away from the screen after a loss to reset the mind. Institute daily loss limits where action is halted after reaching a specific dollar loss or number of [consecutive] losing trades.
Journaling can help by tracking emotions felt during revenge trading to identify personal triggers. In thoughts and writing, make an effort to shift focus away from daily PnL to strict trade plan adherence. As with sports, sometimes the other team is just better that day but sticking with a well-thought-out plan puts the probabilities in your favor.
I believe this was my version of revenge trading. I don’t feel slighted or angry, per se. I do feel a need to act quickly and get on with a new plan that will recoup the losses and maintain the gradually upsloping equity curve. I don’t really think so much—it just becomes my [automated] mission in the moment and I may not process all relevant details (e.g. ignoring the red flags discussed in Parts 9 and 10) before moving forward.
The current instance of revenge trading robbed me of the volatility opportunity discussed in Part 7’s fifth paragraph.
Categories: Option Trading | Comments (0) | PermalinkTrading Epic Fury (Part 11)
Posted by Mark on November 3, 2025 at 07:37 | Last modified: April 7, 2026 08:59Today I want to tie up a couple loose ends from Part 9.
In the fourth paragraph, I said “’last thing I expected’ events happening on an all-too-frequent basis are one thing that make trading difficult.” As improbable as that one-day rally was, any number of such improbable events could have also caused large losses and the chance of encountering one of many is not so small. This likely explains why unexpected events seem all too frequent: they actually are.
Mar 31 actually wasn’t as improbable as I initially thought. The index rallied 2.91%. The previous VIX level of 30.61 equates to an expected move of 1.93% making for a 1.51 standard deviation (SD) move on the day. The probability of 1.51 SD is 6.55% or about once every three weeks. If I were contemplating potential market moves for the next day, then I should cover at least 2 SD, which has a roughly 4.6% chance to occur (2.3% up and 2.3% down).
If “last-thing-I-expected” events seem to be common, then events I should expect more are really no surprise.
One thing not currently part of my routine is a “fire drill” for the next trading day. Using modeling software, the fire drill can expose potential vulnerabilities by looking at changes in profit/loss based on extreme moves. One approach is to look up and down 2 SD on the index with volatility 10 points lower and higher, respectively. If either results in a loss beyond my risk tolerance, then consider making a preemptive adjustment today to prevent a disruptive result tomorrow.
Incorporating a fire drill would change my EOD trading checklist but is definitely worthy of consideration.
I want to revisit the first red flag from Part 9. I saw the extreme gamma and thought “but it’s really just for one trading day.”
Believing I can sneak something past Mr. Market is foolish because it’s never just me thinking that way. Although debatable, it is my opinion from the past 18 years that no ideas are new ideas. Certainly anything I come up with is not going to be unique to the countless trading participants across time and space. If many are thinking the same way, then it’s logical to believe contrarians will also notice and attempt to profit. That can be a threat.
Bottom line: don’t feel emboldened by a short time. It’s much more difficult when others are thinking the same thing.
I may sound like a conspiracy theorist with all this. Whether true or not, one thing I know is that it did not work on Mar 31.
Next time I will talk about Mar 30 and revenge trading.
Categories: Accountability | Comments (0) | Permalink