Cognizant: Efficiency and Outsourcing

04/05/2016 7:00 am EST

Focus: STOCKS

Ingrid Hendershot

Founder and President, Hendershot Investments, Inc.

Our latest recommendation began operations in 1994 as an in-house technology development center for US-based Dun & Bradstreet with operations in India, explains Ingrid Hendershot, editor of Hendershot Investments.

Cognizant Technology Solutions (CTSH) was spun-off as a separate company in 1998 and is now a leading provider of IT, consulting and outsourcing services.

With over 100 development and delivery centers worldwide, Cognizant ranks among the fastest growing companies in the world.

Over the past five years, Cognizant has generated industry-leading growth and rising profitability with sales compounding at a 19% annual rate to more than $12 billion and earnings per share growing at a 17% annual rate.

Cognizant has delivered this growth by helping its clients operate more cost-effectively and efficiently through investments in information technology.

Thanks to strong cash flows and an attractive stock valuation, the company repurchased $375 million of its own shares during the year, including 650,000 shares in the fourth quarter at an average price of $64.77.

Cognizant has $438 million remaining authorized for future share repurchases. Cash and investments, net of debt, increased $1.5 billion to $4.9 billion as of year-end.

Despite an expected slow start to the new year, Cognizant’s outlook for fiscal 2016 is for revenue growth in the range of 10%-14.5%.

Long-term investors should be cognizant of Cognizant Technology Solutions, a high-quality company generating profitable, double-digit growth and strong cash flows. Buy.

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Ingrid Hendershot, Editor of Hendershot Investments

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