Today we’re going to take a look at the well-established Cognizant Technology Solutions Corporation (NASDAQ:CTSH). The company’s stock saw a double-digit share price rise of over 10% in the past couple of months on the NasdaqGS. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Cognizant Technology Solutions’s outlook and value based on the most recent financial data to see if the opportunity still exists. View our latest analysis for Cognizant Technology Solutions
What is Cognizant Technology Solutions worth?
According to my valuation model, the stock is currently overvalued by about 36%, trading at US$82.17 compared to my intrinsic value of $60.24. Not the best news for investors looking to buy! But, is there another opportunity to buy low in the future? Since Cognizant Technology Solutions’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will Cognizant Technology Solutions generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Cognizant Technology Solutions’s earnings over the next few years are expected to increase by 95.66%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in CTSH’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe CTSH should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on CTSH for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for CTSH, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Cognizant Technology Solutions. You can find everything you need to know about Cognizant Technology Solutions in the latest infographic research report. If you are no longer interested in Cognizant Technology Solutions, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.