Cognizant Technology Solutions (CTSH)
marries the best of both worlds, servicing high-end clients in narrow, specialized sectors while sourcing the back end in cheaper technology locales abroad. It works to the degree that information technology services migrate toward Internet-hosted virtual technologies over in-house hardware and software development.
Cognizant Technology Solutions provides custom information technology, consulting and business process outsourcing services. The company operates using a global sourcing model that combines technical and account management teams located on-site at the customer location and at dedicated nearshore and offshore development and delivery centers, located primarily in India, China, the United States, Canada, Argentina, Hungary and the Philippines.
“In order to respond effectively to a changing and challenging business environment, IT departments of many companies have focused increasingly on improving returns on IT investments, lowering costs and accelerating the delivery of new systems and solutions,” Cognizant told investors in a recent filing.
“To accomplish these objectives, many IT departments have shifted all or a portion of their IT development, integration and maintenance requirements to outside service providers operating with global delivery models,” which Cognizant provides.
Cognizant serves four vertically-oriented business segments: financial services; healthcare; manufacturing, retail and logistics; and a category Cognizant calls “other” that includes communications, information, media and entertainment, and high technology.
“This vertical focus has been central to our revenue growth and high customer satisfaction. As the IT services industry continues to mature, clients are looking for service providers who understand their businesses, industry initiatives, cultures and have solutions tailored to meet their individual business needs,” management said.
Cognizant Technology Solutions has a market cap of $18.28 billion in a sector, information technology services, where the average company size is $9.78 billion. Its trailing 12-month P/E ratio is 20.22 and its five-year projected price-to-earnings-growth (PEG) ratio is 1.10, compared to 1.07 for the sector.
Its projected earnings per share growth for the coming year is 18.05 percent, compared to a sector average of 12.65 percent.
Wall Street is bullish on Cognizant, with buy or outperform ratings from Needham & Co., Deutsche Bank, RBC Capital Markets, Piper Jaffray, Citigroup and Jefferies.
“We now see revenue growth of 21 percent in 2012, down from our prior 24 percent estimate, on slower growth in the pharmaceutical and large bank segments in North America.We also think Europe will continue to be a drag,” said S&P analysts on May 7, while maintaining a neutral rating on the stock.
Cognizant Technology Solutions next reports on Aug. 2.
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