Are Investors Undervaluing Cognizant (CTSH) Right Now?

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One stock to keep an eye on is Cognizant (CTSH). CTSH is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock has a Forward P/E ratio of 14.20. This compares to its industry's average Forward P/E of 19.84. CTSH's Forward P/E has been as high as 16.26 and as low as 12.23, with a median of 15.06, all within the past year.

Investors should also note that CTSH holds a PEG ratio of 1.29. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. CTSH's PEG compares to its industry's average PEG of 1.83. Over the past 52 weeks, CTSH's PEG has been as high as 1.61 and as low as 1.03, with a median of 1.47.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. CTSH has a P/S ratio of 1.97. This compares to its industry's average P/S of 2.96.

Finally, we should also recognize that CTSH has a P/CF ratio of 12.95. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. CTSH's P/CF compares to its industry's average P/CF of 49.53. Over the past year, CTSH's P/CF has been as high as 23.44 and as low as 12.90, with a median of 15.76.

Value investors will likely look at more than just these metrics, but the above data helps show that Cognizant is likely undervalued currently. And when considering the strength of its earnings outlook, CTSH sticks out at as one of the market's strongest value stocks.

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