InvestorsObserver gives Cognizant Technology Solutions Corp (CTSH) a strong valuation score of 69 from its analysis. The proprietary scoring system considers the underlying health of a company by analyzing its stock price, earnings, and growth rate. CTSH currently holds a better value than 69% of stocks based on these metrics. Long term investors focused on buying-and-holding should find the valuation ranking system most relevant when making investment decisions.
Metrics Analysis
CTSH's trailing-12-month Price to Earnings (PE) ratio of 25.1 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 2.85 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 1.62. Markets are undervaluing CTSH in relation to its projected growth as its PEG ratio is currently below the fair market value of 1. 2.8499999'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' has a weak valuation at its current share price on account of a overvalued PEG ratio despite strong growth. CTSH's PE and PEG are worse than the market average leading to a below average valuation score.
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