Cognizant Technology Solutions (CTSH) Marked As A Dead Cat Bounce Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Cognizant Technology Solutions ( CTSH) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Cognizant Technology Solutions as such a stock due to the following factors:

  • CTSH has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $338.2 million.
  • CTSH has traded 351,849 shares today.
  • CTSH is up 3% today.
  • CTSH was down 12.6% yesterday.

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More details on CTSH:

Cognizant Technology Solutions Corporation provides information technology (IT), consulting, and business process services worldwide. The company operates in four segments: Financial Services, Healthcare, Manufacturing/Retail/Logistics, and Other. CTSH has a PE ratio of 23.6. Currently there are 12 analysts that rate Cognizant Technology Solutions a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Cognizant Technology Solutions has been 3.4 million shares per day over the past 30 days. Cognizant Technology has a market cap of $30.4 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.55 and a short float of 1.5% with 1.53 days to cover. Shares are down 0.9% year-to-date as of the close of trading on Tuesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Cognizant Technology Solutions as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 11.9%. Since the same quarter one year prior, revenues rose by 19.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • CTSH has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.88, which clearly demonstrates the ability to cover short-term cash needs.
  • COGNIZANT TECH SOLUTIONS has improved earnings per share by 22.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, COGNIZANT TECH SOLUTIONS increased its bottom line by earning $2.02 versus $1.72 in the prior year. This year, the market expects an improvement in earnings ($2.36 versus $2.02).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the IT Services industry average. The net income increased by 22.8% when compared to the same quarter one year prior, going from $284.21 million to $348.88 million.
  • Net operating cash flow has significantly increased by 114.13% to $157.32 million when compared to the same quarter last year. In addition, COGNIZANT TECH SOLUTIONS has also vastly surpassed the industry average cash flow growth rate of -3.17%.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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