CTSH - Embedded Expectations Analysis - 2020 01 07
Cognizant Technology Solutions Corporation (CTSH:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) Earnings, with a 13.2x Uniform P/E, implying bearish expectations for the firm. Although management's concerns about client-partner pricing, their Healthcare segment, and sales team performance suggest the potential for near-term headwinds, long-term upside remains warranted.Specifically, management may lack confidence in the quality of their retention acquisition development model and in their ability to provide client partners with competencies and salespeople in order to get favorable pricing. Moreover, they may be overstating the growth potential of their addressable markets, the turnaround of Banking and Healthcare accounts, and their ability to help clients infuse software into their products. Furthermore, they may be concerned about their Contino acquisition, Healthcare segment rate reductions and volume discounts, and their lack of investment in branding and training. Lastly, they may lack confidence in their ability to improve sales team performance through re-skilling programs.
However, given CTSH's strong historical returns, market expectations remain far too bearish, suggesting longer-term outperformance is likely warranted.
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.
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