Cognizant

Methodology

Cognizant's IT consulting and outsourcing business generates relatively stable earnings, though client budget cycles and project timing create quarterly volatility. The shift toward digital services and cloud migrations provides modest growth offset by legacy application maintenance headwinds. Fair value works best when normalizing for revenue mix shifts and considering low-to-mid single-digit sustainable growth.

Methodology

Cognizant typically trades at low PEG ratios (0.8-1.5x) reflecting concerns about competitive pressures from Indian IT giants and cloud hyperscalers. The company's transformation toward higher-value services supports earnings stability but growth acceleration remains elusive. PEG appears attractive but reflects legitimate questions about differentiation in commoditized IT services.

Methodology

Cognizant pays a modest dividend yielding around 2% with room for growth as the business generates substantial free cash flow. The company supplements dividends with opportunistic share repurchases. Total return benefits from steady yield component that partially offsets modest growth expectations in competitive IT services markets.