Cognizant Technology Solutions (CTSH) put up 37% profit growth last quarter, but signs point to growth slowing some in the coming quarters.
One-Year Chart
You can already see the stock start to decline, but that might be because of the market correction we have been in since last month. 18% growth is expected next quarter, followed by 6%, 11% and then 15%. CTSH is carrying a 26 P/E, above its estimates Long Ter mGrowth Rate of 19%, so the stock could be in for more decline.
I’m glad I sold this stock from the Growth Portfolio.
Revenue is still expected to grow strong. 32% is the expected growth next quarter, funny how revenue is climbing much faster than profits. Exchange rates have been affection this sector a bit. I didn’t get too much into this, because from the looks of the profit outlook the stock isn’t timely enough for me to buy anyway.
Fair Value
Even at a Fair Value P/E of 25, CTSH doesn’t have much upside — and 35 is very fair considering profits aren’t expected to growth that fast in any of the next four quarters.
Bottom Line
CTSH stays on the radar, maybe the stock will come in to a P/E of 20 (right now that’s $56) and we could get in again.
