Intrinsic value of Cognizant Technology Solutions - CTSH

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$57.85

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$57.85

 
Intrinsic value

$57.16

 
Up/down potential

-1%

 
Rating

hold

 
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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 35.4

 

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
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
Revenue, $m
  13,487
  14,445
  15,440
  16,474
  17,550
  18,670
  19,835
  21,048
  22,312
  23,629
  25,003
  26,436
  27,932
  29,494
  31,126
  32,832
  34,616
  36,481
  38,433
  40,476
  42,614
  44,854
  47,199
  49,657
  52,232
  54,931
  57,761
  60,727
  63,838
  67,100
  70,521
Variable operating expenses, $m
 
  11,928
  12,732
  13,568
  14,437
  15,342
  16,283
  17,263
  18,285
  19,349
  20,459
  21,362
  22,571
  23,833
  25,152
  26,530
  27,972
  29,479
  31,056
  32,707
  34,435
  36,245
  38,140
  40,126
  42,207
  44,388
  46,674
  49,071
  51,585
  54,221
  56,986
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
  11,928
  12,732
  13,568
  14,437
  15,342
  16,283
  17,263
  18,285
  19,349
  20,459
  21,362
  22,571
  23,833
  25,152
  26,530
  27,972
  29,479
  31,056
  32,707
  34,435
  36,245
  38,140
  40,126
  42,207
  44,388
  46,674
  49,071
  51,585
  54,221
  56,986
Operating income, $m
  2,289
  2,517
  2,708
  2,907
  3,113
  3,328
  3,552
  3,784
  4,027
  4,280
  4,544
  5,074
  5,361
  5,661
  5,974
  6,302
  6,644
  7,002
  7,377
  7,769
  8,179
  8,609
  9,059
  9,531
  10,025
  10,543
  11,086
  11,656
  12,253
  12,879
  13,536
EBITDA, $m
  2,668
  2,951
  3,154
  3,365
  3,585
  3,814
  4,052
  4,299
  4,557
  4,827
  5,107
  5,400
  5,705
  6,025
  6,358
  6,706
  7,071
  7,452
  7,850
  8,268
  8,705
  9,162
  9,641
  10,143
  10,669
  11,221
  11,798
  12,404
  13,040
  13,706
  14,405
Interest expense (income), $m
  16
  28
  37
  46
  55
  64
  74
  85
  96
  107
  119
  131
  144
  158
  172
  186
  201
  217
  234
  252
  270
  289
  309
  330
  352
  375
  400
  425
  452
  480
  509
Earnings before tax, $m
  2,357
  2,489
  2,671
  2,861
  3,058
  3,264
  3,477
  3,700
  3,931
  4,173
  4,425
  4,943
  5,217
  5,503
  5,803
  6,115
  6,443
  6,785
  7,142
  7,517
  7,909
  8,320
  8,750
  9,201
  9,673
  10,168
  10,687
  11,231
  11,801
  12,399
  13,027
Tax expense, $m
  805
  672
  721
  773
  826
  881
  939
  999
  1,061
  1,127
  1,195
  1,335
  1,409
  1,486
  1,567
  1,651
  1,739
  1,832
  1,928
  2,030
  2,135
  2,246
  2,363
  2,484
  2,612
  2,745
  2,885
  3,032
  3,186
  3,348
  3,517
Net income, $m
  1,553
  1,817
  1,950
  2,089
  2,233
  2,382
  2,538
  2,701
  2,870
  3,046
  3,230
  3,608
  3,808
  4,018
  4,236
  4,464
  4,703
  4,953
  5,214
  5,487
  5,774
  6,073
  6,388
  6,716
  7,061
  7,423
  7,801
  8,198
  8,615
  9,052
  9,510

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
  9,740
  10,411
  11,109
  11,834
  12,589
  13,375
  14,193
  15,045
  15,933
  16,859
  17,826
  18,835
  19,888
  20,989
  22,139
  23,342
  24,599
  25,916
  27,293
  28,735
  30,245
  31,827
  33,484
  35,221
  37,041
  38,949
  40,949
  43,046
  45,246
  47,553
Adjusted assets (=assets-cash), $m
  9,093
  9,740
  10,411
  11,109
  11,834
  12,589
  13,375
  14,193
  15,045
  15,933
  16,859
  17,826
  18,835
  19,888
  20,989
  22,139
  23,342
  24,599
  25,916
  27,293
  28,735
  30,245
  31,827
  33,484
  35,221
  37,041
  38,949
  40,949
  43,046
  45,246
  47,553
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
  2,066
  2,208
  2,356
  2,510
  2,670
  2,836
  3,010
  3,191
  3,379
  3,575
  3,780
  3,994
  4,218
  4,451
  4,695
  4,950
  5,217
  5,496
  5,788
  6,094
  6,414
  6,750
  7,101
  7,469
  7,855
  8,260
  8,684
  9,129
  9,595
  10,085
Working capital, $m
  6,182
  1,170
  1,251
  1,334
  1,422
  1,512
  1,607
  1,705
  1,807
  1,914
  2,025
  2,141
  2,262
  2,389
  2,521
  2,659
  2,804
  2,955
  3,113
  3,279
  3,452
  3,633
  3,823
  4,022
  4,231
  4,449
  4,679
  4,919
  5,171
  5,435
  5,712
Total debt, $m
  878
  1,045
  1,300
  1,565
  1,841
  2,128
  2,426
  2,737
  3,061
  3,399
  3,751
  4,118
  4,501
  4,901
  5,320
  5,757
  6,214
  6,692
  7,192
  7,715
  8,263
  8,837
  9,438
  10,068
  10,728
  11,419
  12,144
  12,905
  13,702
  14,537
  15,414
Total liabilities, $m
  3,534
  3,701
  3,956
  4,221
  4,497
  4,784
  5,082
  5,393
  5,717
  6,055
  6,407
  6,774
  7,157
  7,557
  7,976
  8,413
  8,870
  9,348
  9,848
  10,371
  10,919
  11,493
  12,094
  12,724
  13,384
  14,075
  14,800
  15,561
  16,358
  17,193
  18,070
Total equity, $m
  10,728
  6,039
  6,455
  6,887
  7,337
  7,805
  8,292
  8,799
  9,328
  9,879
  10,453
  11,052
  11,677
  12,331
  13,013
  13,726
  14,472
  15,252
  16,068
  16,922
  17,816
  18,752
  19,733
  20,760
  21,837
  22,965
  24,148
  25,388
  26,689
  28,052
  29,483
Total liabilities and equity, $m
  14,262
  9,740
  10,411
  11,108
  11,834
  12,589
  13,374
  14,192
  15,045
  15,934
  16,860
  17,826
  18,834
  19,888
  20,989
  22,139
  23,342
  24,600
  25,916
  27,293
  28,735
  30,245
  31,827
  33,484
  35,221
  37,040
  38,948
  40,949
  43,047
  45,245
  47,553
Debt-to-equity ratio
  0.082
  0.170
  0.200
  0.230
  0.250
  0.270
  0.290
  0.310
  0.330
  0.340
  0.360
  0.370
  0.390
  0.400
  0.410
  0.420
  0.430
  0.440
  0.450
  0.460
  0.460
  0.470
  0.480
  0.480
  0.490
  0.500
  0.500
  0.510
  0.510
  0.520
  0.520
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
  1,817
  1,950
  2,089
  2,233
  2,382
  2,538
  2,701
  2,870
  3,046
  3,230
  3,608
  3,808
  4,018
  4,236
  4,464
  4,703
  4,953
  5,214
  5,487
  5,774
  6,073
  6,388
  6,716
  7,061
  7,423
  7,801
  8,198
  8,615
  9,052
  9,510
Depreciation, amort., depletion, $m
  379
  433
  446
  458
  472
  486
  500
  515
  530
  547
  564
  326
  344
  364
  384
  405
  427
  450
  474
  499
  525
  553
  582
  612
  644
  677
  712
  749
  787
  827
  869
Funds from operations, $m
  1,150
  2,251
  2,396
  2,547
  2,704
  2,868
  3,038
  3,216
  3,400
  3,593
  3,794
  3,934
  4,153
  4,381
  4,620
  4,869
  5,130
  5,402
  5,688
  5,986
  6,299
  6,626
  6,969
  7,329
  7,705
  8,100
  8,513
  8,947
  9,402
  9,879
  10,379
Change in working capital, $m
  -471
  78
  81
  84
  87
  91
  94
  98
  102
  107
  111
  116
  121
  127
  132
  138
  144
  151
  158
  165
  173
  181
  190
  199
  209
  219
  229
  240
  252
  264
  277
Cash from operations, $m
  1,621
  2,235
  2,315
  2,463
  2,617
  2,777
  2,944
  3,117
  3,298
  3,486
  3,682
  3,818
  4,032
  4,255
  4,487
  4,731
  4,985
  5,251
  5,530
  5,821
  6,126
  6,445
  6,779
  7,130
  7,497
  7,881
  8,284
  8,707
  9,150
  9,614
  10,102
Maintenance CAPEX, $m
  0
  -167
  -178
  -190
  -203
  -216
  -230
  -245
  -259
  -275
  -291
  -308
  -326
  -344
  -364
  -384
  -405
  -427
  -450
  -474
  -499
  -525
  -553
  -582
  -612
  -644
  -677
  -712
  -749
  -787
  -827
New CAPEX, $m
  -300
  -132
  -142
  -148
  -154
  -160
  -167
  -173
  -181
  -188
  -196
  -205
  -214
  -223
  -233
  -244
  -255
  -267
  -279
  -292
  -306
  -320
  -335
  -351
  -368
  -386
  -405
  -424
  -445
  -466
  -489
Cash from investing activities, $m
  -963
  -299
  -320
  -338
  -357
  -376
  -397
  -418
  -440
  -463
  -487
  -513
  -540
  -567
  -597
  -628
  -660
  -694
  -729
  -766
  -805
  -845
  -888
  -933
  -980
  -1,030
  -1,082
  -1,136
  -1,194
  -1,253
  -1,316
Free cash flow, $m
  658
  1,937
  1,995
  2,125
  2,260
  2,401
  2,547
  2,699
  2,858
  3,023
  3,195
  3,305
  3,492
  3,687
  3,890
  4,103
  4,325
  4,558
  4,801
  5,055
  5,321
  5,599
  5,891
  6,196
  6,516
  6,851
  7,202
  7,571
  7,956
  8,361
  8,785
Issuance/(repayment) of debt, $m
  -407
  248
  255
  265
  276
  287
  299
  311
  324
  338
  352
  367
  383
  400
  418
  437
  457
  478
  500
  523
  548
  574
  601
  630
  660
  692
  725
  760
  797
  836
  877
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
  248
  255
  265
  276
  287
  299
  311
  324
  338
  352
  367
  383
  400
  418
  437
  457
  478
  500
  523
  548
  574
  601
  630
  660
  692
  725
  760
  797
  836
  877
Total cash flow (excl. dividends), $m
  -91
  2,185
  2,250
  2,390
  2,536
  2,688
  2,846
  3,010
  3,182
  3,360
  3,547
  3,672
  3,875
  4,087
  4,309
  4,540
  4,783
  5,036
  5,301
  5,578
  5,869
  6,173
  6,492
  6,826
  7,176
  7,543
  7,927
  8,331
  8,753
  9,197
  9,662
Retained Cash Flow (-), $m
  -1,450
  -399
  -416
  -433
  -450
  -468
  -487
  -507
  -528
  -551
  -574
  -599
  -625
  -653
  -682
  -713
  -746
  -780
  -816
  -854
  -894
  -936
  -981
  -1,027
  -1,077
  -1,128
  -1,183
  -1,240
  -1,300
  -1,364
  -1,430
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
 
  6,874
  1,834
  1,958
  2,086
  2,220
  2,359
  2,503
  2,653
  2,809
  2,972
  3,073
  3,250
  3,434
  3,626
  3,827
  4,037
  4,256
  4,485
  4,724
  4,975
  5,237
  5,511
  5,799
  6,099
  6,414
  6,745
  7,090
  7,453
  7,833
  8,232
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
 
  6,591
  1,679
  1,704
  1,718
  1,721
  1,712
  1,691
  1,658
  1,614
  1,558
  1,459
  1,387
  1,306
  1,217
  1,124
  1,026
  926
  826
  727
  632
  542
  457
  380
  311
  250
  197
  152
  115
  86
  62
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 22.6
Price to Sales 2.6
Price to Book 3.3
Price to Tangible Book
Price to Cash Flow 21.7
Price to Free Cash Flow 26.6
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 7.1% 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 611.559 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 $35.4 billion.


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Stock chart of CTSH Financial statements 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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