Cognizant Technology Solutions Corp. (CTSH)

CTSH's industry (Software: Consulting) is very competitive and Cognizant ranks among the leaders. The next few years may deliver some margin erosion (wage inflation in India as one source) but the outlook is still quite bright. We have the projected annual return at 19-20% with an excellent quality rating reflecting the company's financial strength and industry leadership in growth and profitability.

http://stockmarketbeat.com/blog1/2008/02/18/ctsh-still-wary-about-cognizant-after-strong-earnings-report/

For 2008, Cognizant is guiding for 17,000 to 20,000 additional net recruits, which amounts to about 33% growth in headcount.

Meanwhile, the company is projecting revenue gains of “at least 38%.” While there is certainly room to increase utilization from the current 56%, there is a limit to how much can be done. What’s more, with the increased productivity I would normally expect an increase in operating profit margins. Yet the company is guiding to the same 19-20% operating margin range that they always have, and that is “assuming no material appreciation in the Rupee” versus the dollar. To me, that implies that the higher productivity is being offset by higher wages for employees.

There’s also room for doubt around whether performance can be sustained in the financial and retail sectors, which both grew about 50% in 2007.

To make things worse, Cognizant has benefited from tax breaks in India, which are set to expire in March 2009. The tax rate is expected to rise from 16.5% this year to about 25% in 2009 as a result. Over time, it is likely to gradually creep toward the statutory 33.66% rate in India. But for 2009 the drag will be significant, keeping the EPS growth rate well below the growth in revenue.

I frequently gauge the quality of reported earnings by measuring the accrual ratio, or the change in operating assets as a percentage of average net operating assets. As a measure of the percentage of earnings explained by accounting choices rather than cash flow, ideally the ratio should hover around zero. After several quarters of improvement or stabilization, Cognizant’s earnings quality deteriorated significantly.

Consistent performer

This company is well managed and well positioned.
A leader in its segment, and share price has suffered because of uncertainty in the market. Good business, still profitable, just got cheaper because mr market says it needed to.

Provides IT function to corporate clients in financial,healthcare,manufacturing sectors.It programs,integrates these sevices at much lower costs than corporate America can,and does it in-house on customers premises.It is also geared to macro economies,Asia,Eastern Europe,India employing 20+ years of experience based on US experience.

Cheaper labor is not going to stop any time soon. Every company is outsourcing to decrease expenses especially here in Michigan where the economy here is like quicksand.

IT offshoring will continue to grow. The market is not dominated by any single player. The nimble and agressive wons will eat others lunch. CTSH has been growing at 50 to 60% rate with no sign of slowdown. It seems to be investing ahead of its growth and is sitting on a good cash pile of 500+ million with each quarter adding to the cash pile.
Not making large foolish acquisitions but nice small ones to get into new plays and then scaling those offerings organically.

my favorite indian stock. they are so stable, and beat earnings always.

Buy CTSH on the pullback. Growth won't start to slow for years - their margins might shrink but demand isn't showing any signs of weakness.

Quite the contrary - there is huge room to expand in Europe for CTSH (84% growth 2007q1) and Europe only comprises 14% of thier total sales. CTSH is looking up.

CTSH has an excellent growth record and very little debt, 26.1% ROE, 16+% NPM. US based but operating mainly in India, with salaries in Rupees. From when I first bought it has split and doubled in value, I'm biased but confident. I can't speak for a new buyer, but my stock selection system indicates a target price over 4 times the current price; this indicator is what lead me to CTSH a few years ago, and it's still leading.

When the inevitable squeeze reaches deep enough, more businesses than less, will automate to cut labor costs. I feel that from what I read, and it's the same stuff available to everybody with a PC, the CTSH organization executes. Such as the recent acquisition of marketRX for 135m, out of the safe.

VL

Great fundamentals, great price.

This company is one of 62 listed on the BetterInvesting Growth Screen in January 2008. It met 4 criteria: it is projected by Value Line to double earnings in the next five years, has actually doubled earnings in the past 5 years, is selling at price-earnings multiples (P/E’s) that are 110 percent or less of Value Line’s projected earnings growth rate and has a safety rating of average or better. It was listed in the March 2008 BetterInvesting magazine.

Cognizant is the fastest growing computer stock around. It's price performance since going public cleary beats even the one of the "legend" Ebay- both shares went public in the same year.

Cognizant is an indian outsourcing information technology (IT) consulting and technology services, as well as outsourcing services in North America, Europe, and Asia = cheap and profitable business. This mean that CTSH use cheap handwork to sell services at high level of prices. Apart fo the rela business, that i think have everything to win, check the financial ratios: no debt, lots of cash (current ratio of 3,8x), 1trly earnings growth (yoy) of 16,7%, ROE of 25,09% and profit margin of 15,3%. The only thing that worries me is the P/B of 2,68x. Maybe the stock could have a further correction but still, today buying CTSH it seems a good bet for the long run!

Third largest outsourcing indian company with 13.3 billion mktcap. Super fundamentals!! One of the best fundamental picks. Price straight up from 2002. Recent accelerate. Should correct a bit. But long term very bullish.

The company management is focused on growth, it has lots of cash reserve, it has a strong offshore/onsite model, it will continue to deliver the growth rate 60-70% as in the past 1 year

Excellent management, provide seamless outsourcing service with a high level of efficiency that competitors have a hard time to match. Despite the run up in recent years the game for this mid cap is not over yet. Has a large footprint on many countries and excellent customer retention rate. Predictable earnings. I have owned it since it was $3.50 on a split basis. Love it.

Stock has grown steady in both poor and good markets. Will grow furtgher in the next few months