Cognizant Technology (CTSH)
By Timothy Lutts, Chief Analyst, Cabot Stock of the Month
From Cabot Wealth Advisory August 27, 2015 Sign up for Cabot Wealth Advisory—it's free!
Value investors suddenly have numerous opportunities to pick up good, high-quality companies cheap!
In my mind, there are two ways to do this.
Strategy One is to buy a quality undervalued stock that’s just pulled back to a decent support level, like Cognizant Technology Solutions (CTSH).
Cognizant, in business since 1996, provides technology consulting and outsourcing services to a wide range of companies in financial services, healthcare, manufacturing, retail, and more. With revenues of $11.3 billion in the past year, it grows revenues and earnings every year by double-digit rates. It pays no dividend. And it’s now trading at a reasonable PE ratio of 21.
The chart shows that CTSH has recently pulled back from nearly 70 to the 60 level, where it has support dating all the way back to February. It’s now 12% off its high.
Strategy Two is to target a stock that’s gone of the rails, that’s been thrown to the dogs, like Schlumberger (SLB).
If you’re in a gambling mood, you could jump into SLB here; it’s got to bottom somewhere. Or if you’re a bit less adventurous, you could buy some CTSH. Odds look good.
But what I really recommend is that you become a regular reader of Cabot Benjamin Graham Value Investor, where every month, Roy Ward, Cabot’s value expert, provides a complete overview of the market along with assessments of the top 275 value stocks.
Both Cognizant and Schlumberger are on this list, and Roy has specific Maximum Buy Prices for each one of them, prices that ensure that you don’t overpay for either of these stocks.
Roy’s system, which he’s been refining for 51 years, is rock-solid.
Over the 12 years the Roy has been with Cabot, his portfolio is up 250%, compared to increases of 98% for the Dow and 123% for the S&P 500. Click here for more information.
From Cabot Wealth Advisory 12/26/13 Sign up for free Cabot Wealth Advisory
Cognizant Technology (CTSH) offers complete start-to-finish solutions for designing, testing and integrating complex software systems for corporations. More companies are outsourcing partial and full responsibility of their technology functions to Cognizant. Clients want to cut costs and transition quickly to new technologies that include Cloud computing and electronic business activities, which can be completed electronically.
Management raised its sales and earnings forecast for 2014 based on solid growth from all product segments and from all locations. Sales and EPS (earnings per share) likely surged 20% in 2013. Sales and EPS will rise another 18% in 2014. Additional expansion overseas and advancement into the telecomm, media and entertainment sectors offer outstanding opportunities for growth.
CTSH shares are reasonably valued at 23.9 times current earnings per share. CTSH has no debt and lots of cash to fund initiatives for continued growth. The stock does not pay a dividend. I expect CTSH to increase to my Minimum Sell Price of 136.16 within one year.
Click here for more information on Cabot Benjamin Graham Value Investor.
|Cognizant Technology Solutions Corporation (CTSH)
500 Frank West Burr Boulevard
Glenpointe Centre West
Teaneck, New Jersey 07666
Index Membership: Nasdaq 100
Industry: Business Software & Services
Full Time Employees: 166,400
12/26/13 Cognizant Technology (CTSH): Outstanding opportunities