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Examining Cognizant Technology Solutions Corporation’s (NASDAQ:CTSH) past track record of performance is a useful exercise for investors. It allows us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess CTSH’s latest performance announced on 31 December 2018 and weight these figures against its longer term trend and industry movements.
Did CTSH’s recent earnings growth beat the long-term trend and the industry?
CTSH’s trailing twelve-month earnings (from 31 December 2018) of US$2.1b has jumped 40% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 5.1%, indicating the rate at which CTSH is growing has accelerated. What’s enabled this growth? Let’s take a look at whether it is merely because of industry tailwinds, or if Cognizant Technology Solutions has seen some company-specific growth.
In terms of returns from investment, Cognizant Technology Solutions has fallen short of achieving a 20% return on equity (ROE), recording 18% instead. However, its return on assets (ROA) of 12% exceeds the US IT industry of 6.4%, indicating Cognizant Technology Solutions has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Cognizant Technology Solutions’s debt level, has increased over the past 3 years from 21% to 21%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research Cognizant Technology Solutions to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CTSH’s future growth? Take a look at our free research report of analyst consensus for CTSH’s outlook.
- Financial Health: Are CTSH’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2018. This may not be consistent with full year annual report figures.
To help readers see past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.