Investigating Cognizant Tech Solns's Standing In IT Services Industry Compared To Competitors

In the ever-changing and fiercely competitive business landscape, conducting thorough company analysis is crucial for investors and industry experts. In this article, we will undertake a comprehensive industry comparison, evaluating Cognizant Tech Solns CTSH and its primary competitors in the IT Services industry. By closely examining key financial metrics, market position, and growth prospects, our aim is to provide valuable insights for investors and shed light on company's performance within the industry.

Cognizant Tech Solns Background

Cognizant is a global IT services provider, offering consulting and outsourcing services to some of the world's largest enterprises spanning the financial services, media and communications, healthcare, natural resources, and consumer products industries. Cognizant employs nearly 300,000 people globally, roughly 70% of whom are in India, although the company's headquarters are in Teaneck, New Jersey.

Company P/E P/B P/S ROE EBITDA (in billions) Gross Profit (in billions) Revenue Growth
Cognizant Technology Solutions Corp 18.09 2.89 1.94 4.07% $0.87 $1.69 0.82%
Accenture PLC 32.32 8.20 3.45 7.54% $2.97 $5.45 3.03%
International Business Machines Corp 20.75 6.36 2.43 7.53% $3.38 $8.02 4.58%
Infosys Ltd 25.22 7.84 4.13 7.99% $1.08 $1.45 3.58%
Gartner Inc 38.12 60.99 6.08 31.22% $0.29 $0.96 5.78%
Wipro Ltd 20.20 3.23 2.56 3.87% $38.12 $65.97 -0.11%
EPAM Systems Inc 36.70 5.15 3.66 2.96% $0.17 $0.36 -6.1%
Globant SA 65.66 5.88 5.08 2.63% $0.06 $0.2 18.83%
Endava PLC 46.93 5.79 4.44 2.11% $0.02 $0.05 -3.95%
Perficient Inc 23.56 4.63 2.67 4.62% $0.04 $0.07 -1.92%
Formula Systems (1985) Ltd 15.97 1.71 0.38 2.69% $0.06 $0.16 4.33%
CI&T Inc 21.06 2.36 1.51 2.56% $0.09 $0.17 -5.35%
The Hackett Group Inc 17.94 7.61 2.19 12.25% $0.01 $0.03 5.31%
Information Services Group Inc 17.56 2.19 0.80 3.06% $0.01 $0.03 4.27%
CSP Inc 18.59 2.08 1.40 2.92% $0.0 $0.01 -8.14%
DecisionPoint Systems Inc 14.51 2.31 0.42 5.48% $0.0 $0.01 5.55%
Average 27.67 8.42 2.75 6.63% $3.09 $5.53 1.98%

By analyzing Cognizant Tech Solns, we can infer the following trends:

  • The Price to Earnings ratio of 18.09 is 0.65x lower than the industry average, indicating potential undervaluation for the stock.

  • With a Price to Book ratio of 2.89, significantly falling below the industry average by 0.34x, it suggests undervaluation and the possibility of untapped growth prospects.

  • With a relatively low Price to Sales ratio of 1.94, which is 0.71x the industry average, the stock might be considered undervalued based on sales performance.

  • With a Return on Equity (ROE) of 4.07% that is 2.56% below the industry average, it appears that the company exhibits potential inefficiency in utilizing equity to generate profits.

  • With lower Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $870 Million, which is 0.28x below the industry average, the company may face lower profitability or financial challenges.

  • Compared to its industry, the company has lower gross profit of $1.69 Billion, which indicates 0.31x below the industry average, potentially indicating lower revenue after accounting for production costs.

  • The company's revenue growth of 0.82% is significantly lower compared to the industry average of 1.98%. This indicates a potential fall in the company's sales performance.

Debt To Equity Ratio

The debt-to-equity (D/E) ratio is a key indicator of a company's financial health and its reliance on debt financing.

Considering the debt-to-equity ratio in industry comparisons allows for a concise evaluation of a company's financial health and risk profile, aiding in informed decision-making.

By analyzing Cognizant Tech Solns in relation to its top 4 peers based on the Debt-to-Equity ratio, the following insights can be derived:

  • Compared to its top 4 peers, Cognizant Tech Solns has a stronger financial position indicated by its lower debt-to-equity ratio of 0.11.

  • This suggests that the company relies less on debt financing and has a more favorable balance between debt and equity, which can be seen as a positive attribute by investors.

Key Takeaways

The valuation analysis for Cognizant Tech Solns in the IT Services industry indicates that its PE, PB, and PS ratios are low compared to its peers. This suggests that the company may be undervalued in terms of its earnings, book value, and sales. However, its low ROE, EBITDA, gross profit, and revenue growth indicate potential challenges in generating profitability and growth compared to its industry peers.

This article was generated by Benzinga's automated content engine and reviewed by an editor.

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