Intrinsic value of Cognizant Technology Solutions - CTSH

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$68.79

  Intrinsic Value

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  Value-price divergence*

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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of CTSH stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 41.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  8.63
  10.70
  10.13
  9.62
  9.16
  8.74
  8.37
  8.03
  7.73
  7.45
  7.21
  6.99
  6.79
  6.61
  6.45
  6.30
  6.17
  6.06
  5.95
  5.86
  5.77
  5.69
  5.62
  5.56
  5.51
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
Revenue, $m
  13,487
  14,930
  16,443
  18,024
  19,674
  21,393
  23,183
  25,045
  26,980
  28,991
  31,080
  33,252
  35,509
  37,856
  40,298
  42,838
  45,483
  48,237
  51,108
  54,100
  57,222
  60,480
  63,881
  67,433
  71,146
  75,026
  79,085
  83,330
  87,773
  92,424
  97,293
Variable operating expenses, $m
 
  12,320
  13,542
  14,820
  16,153
  17,543
  18,989
  20,493
  22,057
  23,682
  25,370
  26,870
  28,694
  30,590
  32,563
  34,616
  36,753
  38,979
  41,298
  43,717
  46,239
  48,871
  51,620
  54,490
  57,490
  60,626
  63,906
  67,336
  70,926
  74,684
  78,619
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  11,198
  12,320
  13,542
  14,820
  16,153
  17,543
  18,989
  20,493
  22,057
  23,682
  25,370
  26,870
  28,694
  30,590
  32,563
  34,616
  36,753
  38,979
  41,298
  43,717
  46,239
  48,871
  51,620
  54,490
  57,490
  60,626
  63,906
  67,336
  70,926
  74,684
  78,619
Operating income, $m
  2,289
  2,610
  2,901
  3,204
  3,521
  3,851
  4,194
  4,552
  4,923
  5,309
  5,710
  6,382
  6,816
  7,266
  7,735
  8,222
  8,730
  9,259
  9,809
  10,384
  10,983
  11,608
  12,261
  12,943
  13,655
  14,400
  15,179
  15,994
  16,847
  17,739
  18,674
EBITDA, $m
  2,668
  3,050
  3,359
  3,682
  4,019
  4,370
  4,735
  5,116
  5,511
  5,922
  6,349
  6,792
  7,253
  7,733
  8,231
  8,750
  9,291
  9,853
  10,439
  11,051
  11,688
  12,354
  13,049
  13,774
  14,533
  15,325
  16,154
  17,021
  17,929
  18,879
  19,873
Interest expense (income), $m
  16
  28
  41
  55
  69
  83
  99
  115
  132
  149
  167
  186
  205
  225
  247
  268
  291
  315
  340
  365
  392
  420
  449
  480
  512
  545
  580
  616
  654
  694
  736
Earnings before tax, $m
  2,357
  2,582
  2,860
  3,150
  3,452
  3,767
  4,095
  4,437
  4,791
  5,160
  5,543
  6,196
  6,610
  7,041
  7,488
  7,954
  8,439
  8,944
  9,470
  10,018
  10,591
  11,188
  11,812
  12,463
  13,144
  13,855
  14,599
  15,378
  16,193
  17,045
  17,938
Tax expense, $m
  805
  697
  772
  850
  932
  1,017
  1,106
  1,198
  1,294
  1,393
  1,497
  1,673
  1,785
  1,901
  2,022
  2,148
  2,278
  2,415
  2,557
  2,705
  2,860
  3,021
  3,189
  3,365
  3,549
  3,741
  3,942
  4,152
  4,372
  4,602
  4,843
Net income, $m
  1,553
  1,885
  2,087
  2,299
  2,520
  2,750
  2,990
  3,239
  3,498
  3,767
  4,046
  4,523
  4,826
  5,140
  5,466
  5,806
  6,160
  6,529
  6,913
  7,313
  7,731
  8,167
  8,622
  9,098
  9,595
  10,114
  10,658
  11,226
  11,821
  12,443
  13,095

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  5,169
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  14,262
  10,068
  11,087
  12,154
  13,266
  14,426
  15,633
  16,888
  18,193
  19,549
  20,958
  22,422
  23,944
  25,527
  27,173
  28,886
  30,669
  32,527
  34,462
  36,480
  38,585
  40,782
  43,075
  45,471
  47,974
  50,591
  53,328
  56,190
  59,186
  62,322
  65,605
Adjusted assets (=assets-cash), $m
  9,093
  10,068
  11,087
  12,154
  13,266
  14,426
  15,633
  16,888
  18,193
  19,549
  20,958
  22,422
  23,944
  25,527
  27,173
  28,886
  30,669
  32,527
  34,462
  36,480
  38,585
  40,782
  43,075
  45,471
  47,974
  50,591
  53,328
  56,190
  59,186
  62,322
  65,605
Revenue / Adjusted assets
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
  1.483
Average production assets, $m
  1,934
  2,135
  2,351
  2,577
  2,813
  3,059
  3,315
  3,581
  3,858
  4,146
  4,444
  4,755
  5,078
  5,413
  5,763
  6,126
  6,504
  6,898
  7,308
  7,736
  8,183
  8,649
  9,135
  9,643
  10,174
  10,729
  11,309
  11,916
  12,552
  13,217
  13,913
Working capital, $m
  6,182
  1,209
  1,332
  1,460
  1,594
  1,733
  1,878
  2,029
  2,185
  2,348
  2,518
  2,693
  2,876
  3,066
  3,264
  3,470
  3,684
  3,907
  4,140
  4,382
  4,635
  4,899
  5,174
  5,462
  5,763
  6,077
  6,406
  6,750
  7,110
  7,486
  7,881
Total debt, $m
  878
  1,170
  1,557
  1,962
  2,385
  2,826
  3,284
  3,761
  4,257
  4,772
  5,308
  5,864
  6,443
  7,044
  7,670
  8,321
  8,998
  9,704
  10,440
  11,207
  12,006
  12,841
  13,713
  14,623
  15,574
  16,569
  17,608
  18,696
  19,835
  21,026
  22,274
Total liabilities, $m
  3,534
  3,826
  4,213
  4,618
  5,041
  5,482
  5,940
  6,417
  6,913
  7,428
  7,964
  8,520
  9,099
  9,700
  10,326
  10,977
  11,654
  12,360
  13,096
  13,863
  14,662
  15,497
  16,369
  17,279
  18,230
  19,225
  20,264
  21,352
  22,491
  23,682
  24,930
Total equity, $m
  10,728
  6,242
  6,874
  7,535
  8,225
  8,944
  9,692
  10,470
  11,279
  12,120
  12,994
  13,902
  14,845
  15,827
  16,847
  17,909
  19,015
  20,167
  21,367
  22,618
  23,923
  25,285
  26,707
  28,192
  29,744
  31,366
  33,063
  34,838
  36,695
  38,640
  40,675
Total liabilities and equity, $m
  14,262
  10,068
  11,087
  12,153
  13,266
  14,426
  15,632
  16,887
  18,192
  19,548
  20,958
  22,422
  23,944
  25,527
  27,173
  28,886
  30,669
  32,527
  34,463
  36,481
  38,585
  40,782
  43,076
  45,471
  47,974
  50,591
  53,327
  56,190
  59,186
  62,322
  65,605
Debt-to-equity ratio
  0.082
  0.190
  0.230
  0.260
  0.290
  0.320
  0.340
  0.360
  0.380
  0.390
  0.410
  0.420
  0.430
  0.450
  0.460
  0.460
  0.470
  0.480
  0.490
  0.500
  0.500
  0.510
  0.510
  0.520
  0.520
  0.530
  0.530
  0.540
  0.540
  0.540
  0.550
Adjusted equity ratio
  0.611
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620
  0.620

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,553
  1,885
  2,087
  2,299
  2,520
  2,750
  2,990
  3,239
  3,498
  3,767
  4,046
  4,523
  4,826
  5,140
  5,466
  5,806
  6,160
  6,529
  6,913
  7,313
  7,731
  8,167
  8,622
  9,098
  9,595
  10,114
  10,658
  11,226
  11,821
  12,443
  13,095
Depreciation, amort., depletion, $m
  379
  439
  458
  478
  498
  519
  541
  564
  588
  613
  639
  410
  438
  467
  497
  528
  561
  595
  630
  667
  705
  746
  787
  831
  877
  925
  975
  1,027
  1,082
  1,139
  1,199
Funds from operations, $m
  1,150
  2,325
  2,546
  2,777
  3,018
  3,269
  3,531
  3,803
  4,086
  4,380
  4,685
  4,933
  5,263
  5,606
  5,963
  6,334
  6,721
  7,123
  7,543
  7,980
  8,437
  8,913
  9,410
  9,929
  10,472
  11,039
  11,632
  12,253
  12,903
  13,582
  14,294
Change in working capital, $m
  -471
  117
  123
  128
  134
  139
  145
  151
  157
  163
  169
  176
  183
  190
  198
  206
  214
  223
  233
  242
  253
  264
  275
  288
  301
  314
  329
  344
  360
  377
  394
Cash from operations, $m
  1,621
  2,208
  2,423
  2,649
  2,884
  3,130
  3,386
  3,652
  3,929
  4,217
  4,516
  4,757
  5,080
  5,416
  5,765
  6,129
  6,507
  6,900
  7,310
  7,738
  8,184
  8,649
  9,134
  9,642
  10,171
  10,725
  11,304
  11,909
  12,543
  13,206
  13,900
Maintenance CAPEX, $m
  0
  -167
  -184
  -203
  -222
  -243
  -264
  -286
  -309
  -333
  -357
  -383
  -410
  -438
  -467
  -497
  -528
  -561
  -595
  -630
  -667
  -705
  -746
  -787
  -831
  -877
  -925
  -975
  -1,027
  -1,082
  -1,139
New CAPEX, $m
  -300
  -201
  -216
  -226
  -236
  -246
  -256
  -266
  -277
  -288
  -299
  -311
  -323
  -336
  -349
  -363
  -378
  -394
  -410
  -428
  -446
  -466
  -486
  -508
  -531
  -555
  -580
  -607
  -635
  -665
  -696
Cash from investing activities, $m
  -963
  -368
  -400
  -429
  -458
  -489
  -520
  -552
  -586
  -621
  -656
  -694
  -733
  -774
  -816
  -860
  -906
  -955
  -1,005
  -1,058
  -1,113
  -1,171
  -1,232
  -1,295
  -1,362
  -1,432
  -1,505
  -1,582
  -1,662
  -1,747
  -1,835
Free cash flow, $m
  658
  1,840
  2,023
  2,220
  2,426
  2,642
  2,866
  3,100
  3,343
  3,596
  3,859
  4,064
  4,348
  4,643
  4,950
  5,269
  5,600
  5,946
  6,305
  6,680
  7,071
  7,478
  7,903
  8,346
  8,809
  9,293
  9,799
  10,327
  10,880
  11,459
  12,064
Issuance/(repayment) of debt, $m
  -407
  373
  388
  405
  423
  441
  459
  477
  496
  515
  535
  556
  578
  601
  626
  651
  678
  706
  736
  767
  800
  835
  872
  910
  951
  994
  1,040
  1,088
  1,138
  1,192
  1,248
Issuance/(repurchase) of shares, $m
  -336
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -719
  373
  388
  405
  423
  441
  459
  477
  496
  515
  535
  556
  578
  601
  626
  651
  678
  706
  736
  767
  800
  835
  872
  910
  951
  994
  1,040
  1,088
  1,138
  1,192
  1,248
Total cash flow (excl. dividends), $m
  -91
  2,213
  2,410
  2,625
  2,849
  3,082
  3,325
  3,577
  3,839
  4,112
  4,395
  4,620
  4,926
  5,244
  5,575
  5,919
  6,278
  6,652
  7,041
  7,447
  7,870
  8,312
  8,774
  9,256
  9,760
  10,287
  10,838
  11,415
  12,019
  12,650
  13,312
Retained Cash Flow (-), $m
  -1,450
  -602
  -632
  -661
  -690
  -719
  -748
  -778
  -809
  -841
  -874
  -908
  -944
  -981
  -1,021
  -1,062
  -1,106
  -1,152
  -1,200
  -1,251
  -1,305
  -1,362
  -1,422
  -1,485
  -1,552
  -1,622
  -1,697
  -1,775
  -1,857
  -1,944
  -2,036
Prev. year cash balance distribution, $m
 
  5,088
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  6,699
  1,778
  1,964
  2,159
  2,363
  2,577
  2,799
  3,030
  3,271
  3,521
  3,712
  3,982
  4,263
  4,554
  4,857
  5,172
  5,500
  5,841
  6,196
  6,565
  6,951
  7,352
  7,771
  8,208
  8,665
  9,142
  9,640
  10,161
  10,706
  11,276
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  6,423
  1,628
  1,709
  1,778
  1,832
  1,870
  1,891
  1,894
  1,879
  1,846
  1,763
  1,699
  1,621
  1,529
  1,426
  1,314
  1,197
  1,076
  954
  834
  719
  610
  509
  418
  337
  267
  207
  157
  117
  85
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Cognizant Technology Solutions Corporation provides information technology (IT), consulting, and business process services worldwide. The company operates through four segments: Financial Services, Healthcare, Manufacturing/Retail/Logistics, and Other. Its consulting and technology services include IT strategy consulting, program management consulting, operations improvement consulting, strategy consulting, and business consulting services; and application design and development, systems integration, enterprise resource planning, and customer relationship management implementation services. The company also offers enterprise information management services, such as strategic, advisory, and management consulting; enterprise data management; descriptive analytics/business intelligence; strategic corporate performance management; and packaged analytics services, as well as big data services that assist clients in managing and deriving actionable insights. In addition, it provides application testing services; and develops, licenses, implements, and supports proprietary and third-party software products, as well as offers digital technologies services. Further, the company offers outsourcing services, such as application maintenance services; IT infrastructure services; and business process services, including clinical data management, pharmacovigilance, equity research support, commercial operations, and order management. It serves various industries, including banking and insurance; healthcare and life sciences; manufacturing and logistics; retail, travel, and hospitality; consumer goods; communications; information, media, and entertainment; and technology. The company markets and sells services through its professional staff, senior management, and direct sales personnel. Cognizant Technology Solutions Corporation was founded in 1998 and is headquartered in Teaneck, New Jersey.

FINANCIAL RATIOS  of  Cognizant Technology Solutions (CTSH)

Valuation Ratios
P/E Ratio 26.9
Price to Sales 3.1
Price to Book 3.9
Price to Tangible Book
Price to Cash Flow 25.8
Price to Free Cash Flow 31.7
Growth Rates
Sales Growth Rate 8.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 9.9%
Cap. Spend. - 3 Yr. Gr. Rate 2.7%
Financial Strength
Quick Ratio 64
Current Ratio 0.2
LT Debt to Equity 7.4%
Total Debt to Equity 8.2%
Interest Coverage 148
Management Effectiveness
Return On Assets 11.4%
Ret/ On Assets - 3 Yr. Avg. 13.1%
Return On Total Capital 14%
Ret/ On T. Cap. - 3 Yr. Avg. 16.3%
Return On Equity 15.5%
Return On Equity - 3 Yr. Avg. 18.5%
Asset Turnover 1
Profitability Ratios
Gross Margin 40.5%
Gross Margin - 3 Yr. Avg. 40.7%
EBITDA Margin 20.4%
EBITDA Margin - 3 Yr. Avg. 20.5%
Operating Margin 17%
Oper. Margin - 3 Yr. Avg. 17.5%
Pre-Tax Margin 17.5%
Pre-Tax Margin - 3 Yr. Avg. 17.9%
Net Profit Margin 11.5%
Net Profit Margin - 3 Yr. Avg. 12.9%
Effective Tax Rate 34.2%
Eff/ Tax Rate - 3 Yr. Avg. 28.1%
Payout Ratio 0%

CTSH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CTSH stock intrinsic value calculation we used $13487 million for the last fiscal year's total revenue generated by Cognizant Technology Solutions. The default revenue input number comes from 2016 income statement of Cognizant Technology Solutions. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CTSH stock valuation model: a) initial revenue growth rate of 10.7% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for CTSH is calculated based on our internal credit rating of Cognizant Technology Solutions, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Cognizant Technology Solutions.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CTSH stock the variable cost ratio is equal to 82.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for CTSH stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Cognizant Technology Solutions.

Corporate tax rate of 27% is the nominal tax rate for Cognizant Technology Solutions. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CTSH stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CTSH are equal to 14.3%.

Life of production assets of 11.6 years is the average useful life of capital assets used in Cognizant Technology Solutions operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CTSH is equal to 8.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $10728 million for Cognizant Technology Solutions - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 603.485 million for Cognizant Technology Solutions is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Cognizant Technology Solutions at the current share price and the inputted number of shares is $41.5 billion.


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COMPANY NEWS

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▶ Cognizant meets 1Q profit forecasts   [06:15AM  Associated Press]
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Stock chart of CTSH Financial statements of CTSH Annual reports of CTSH
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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