CTSH - Embedded Expectations Analysis - 2018 12 04
Cognizant Technology Solutions Corporation (CTSH:USA) currently trades well below corporate averages relative to UAFRS-based (Uniform) Earnings, with a 13.8x Uniform P/E, implying bearish expectations for the firm. Additionally, management may have concerns about the strength of their banking client relationships, IoT solutions implementation, and spending among their manufacturing clientsSpecifically, management may lack confidence in their ability to drive margin expansion while growing their business, and to reinvest any additional cash generated above their 21% margin target to drive their shift to digital. Moreover, they may be exaggerating how common it is for offshore attrition rates to be higher than on-site, and may have concerns about the size of clients that are brought on in some acquisitions. In addition, they may lack confidence in their ability to deploy IoT solutions to help develop new business models, and in the sustainability of high spending among their manufacturing clients. They may also be exaggerating their confidence that their banking-related digital revenue growth will offset the pressure on their run-the-bank spending, and the quality of their talent across their geographies. Lastly, they may lack confidence in their ability to manage shifts in spending among international banking clients, and may be exaggerating the strength of their relationships with these clients
Cognizant Technology Solutions is a services company, transforming customers' business, operating and technology models for the digital era. The company's services include digital services and solutions, consulting, application development, systems integration, application testing, application maintenance, infrastructure services and business process services. Additionally, the company develops, licenses, implements and supports proprietary and third-party software products and platforms. The company has organized its services and solutions into four practice areas: Digital Business, Digital Operations, Digital Systems and Technology and Consulting.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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