CTSH Stock Study (6-10-26)

Posted by Mark on November 14, 2025 at 06:59 | Last modified: June 10, 2026 07:31

I 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.

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