Cognizant Technology Solutions Corp (CTSH) receives a strong valuation score of 65 from InvestorsObserver's analysis. Our proprietary scoring system considers the overall health of the company by looking at the stock's price, earnings, and growth rate to determine if it represents a good value. CTSH holds a better value than 65% of stocks at its current price. Investors who are focused on long-term growth through buy-and-hold investing will find the Valuation Rank especially relevant when allocating their assets.
Metrics Analysis
CTSH's trailing-12-month Price to Earnings (PE) ratio of 31.3 puts it above the historical average of roughly 15. CTSH is a poor value at its current trading price as investors are paying more than what its worth in relation to the company's earnings. CTSH's trailing-12-month earnings per share (EPS) of 2.57 does not justify what it is currently trading at in the market. Trailing PE ratios, however, do not factor in a company's projected growth rate, resulting in some firms having high PE ratios due to high growth potentially enticing investors even if current earnings are low.
CTSH has a 12 month forward PE to Growth (PEG) ratio of 1.83. Markets are undervaluing CTSH in relation to its projected growth as its PEG ratio is currently below the fair market value of 1. 2.56999993's PEG comes from its forward price to earnings ratio being divided by its growth rate. PEG ratios are one of the most used valuation metrics due to its incorporation of more company fundamentals metrics and a focus on the firm's future rather than its past.
Summary
CTSH's valuation metrics are weak at its current price due to a overvalued PEG ratio despite strong growth. CTSH's PE and PEG are worse than the market average resulting in a below average valuation score.
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