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Should Cognizant Technology Solutions (NASDAQ:CTSH) Be Disappointed With Their 42% Profit?

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·3 min read
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We believe investing is smart because history shows that stock markets go higher in the long term. But not every stock you buy will perform as well as the overall market. Over the last year the Cognizant Technology Solutions Corporation (NASDAQ:CTSH) share price is up 42%, but that's less than the broader market return. On the other hand, longer term shareholders have had a tougher run, with the stock falling 2.8% in three years.

Check out our latest analysis for Cognizant Technology Solutions

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the last year, Cognizant Technology Solutions actually saw its earnings per share drop 22%.

This means it's unlikely the market is judging the company based on earnings growth. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

We are skeptical of the suggestion that the 1.2% dividend yield would entice buyers to the stock. Revenue was pretty stable on last year, so deeper research might be needed to explain the share price rise.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

earnings-and-revenue-growth
earnings-and-revenue-growth

Cognizant Technology Solutions is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

A Different Perspective

Cognizant Technology Solutions provided a TSR of 44% over the last twelve months. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 7% over half a decade This suggests the company might be improving over time. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

But note: Cognizant Technology Solutions may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.