NEW YORK (TheStreet) -- Shares of Cognizant Technology Solutions Corp. (CTSH - Get Report) are higher by 2.48% to $45.87 in pre-market trading on Monday, after the company announced it has agreed to purchase the privately held TriZetto Corp. for $2.7 billion in cash.
Cognizant Technology, a provider of custom information technology, consulting and business process outsourcing services, said it expects the acquisition to "accelerate significantly its market position and strategy of delivering innovative healthcare software and solutions to a wide range of healthcare clients."
TriZetto is a provider of healthcare IT software and solutions. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
"The transaction is expected to be immediately accretive to Cognizant's non-GAAP EPS, excluding one-time transaction costs and adjustments. That earnings benefit is expected to increase over time as we realize significant revenue synergy potential from the combination of these businesses" company CFO Karen McLoughlin said.
The deal is expected to close in the 2014 fourth quarter.
Separately, TheStreet Ratings team rates COGNIZANT TECH SOLUTIONS as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate COGNIZANT TECH SOLUTIONS (CTSH) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. 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, reasonable valuation levels, impressive record of earnings per share growth and compelling growth in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 12.2%. Since the same quarter one year prior, revenues rose by 16.5%. 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 3.99, which clearly demonstrates the ability to cover short-term cash needs.
- COGNIZANT TECH SOLUTIONS has improved earnings per share by 23.2% 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 ($2.35 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 23.8% when compared to the same quarter one year prior, going from $300.41 million to $371.91 million.
- You can view the full analysis from the report here: CTSH Ratings Report
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