NEW YORK (TheStreet) -- Shares of Cognizant Technology Solutions Corp. (CTSH) are declining, down by 1.17% to $53.02 in early market trading Tuesday, after the IT services and consulting company had its rating cut to "neutral" from "buy" by analysts at UBS this morning.
Analysts at the wealth management firm cited a more balanced risk/reward ratio following the company's recent rally in shares.
UBS maintained its $57 price target on shares of Cognizant.
Teaneck, NJ-based Cognizant provides custom information technology, consulting and business process outsourcing services, operating in four segments including financial services, healthcare, manufacturing, and retail.
Separately, TheStreet Ratings team rates COGNIZANT TECH SOLUTIONS as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate COGNIZANT TECH SOLUTIONS (CTSH) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, solid stock price performance and growth in earnings per share. 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 6.8%. Since the same quarter one year prior, revenues rose by 11.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving 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 3.89, which clearly demonstrates the ability to cover short-term cash needs.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- COGNIZANT TECH SOLUTIONS has improved earnings per share by 10.5% 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 net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the IT Services industry average. The net income increased by 11.3% when compared to the same quarter one year prior, going from $319.63 million to $355.62 million.
- You can view the full analysis from the report here: CTSH Ratings Report