Cognizant: A Way to Play India and Healthcare

Townhall.com ^ | February 10, 2015 | Bill Gunderson

[Kaslin]

Cognizant Technology Solutions (CTSH) is one of the largest providers of technology, consulting and business process outsourcing services. The company was founded in 1994 as a captive arm of Dun & Bradstreet and started trading on the NASDAQ in 1998. The stock just hit an all-time high after reporting 4Q earnings and revenues that exceeded analyst estimates. One of the key drivers this quarter was a 26% surge in revenue from the health care division, its second biggest division behind financial services.

Cognizant expanded its health-care offering to take advantage of the industry-wide overhaul of the healthcare system spurred by the Healthcare Reform Act. Last year Cognizant purchased TriZetto which expanded its healthcare industry software. The acquisition was its biggest to date at $2.7 billion in cash, but clearly Cognizant is reaping the benefits from this acquisition.

Even though Cognizant is based in Teaneck, New Jersey, the company also represents a way to play India. Like many IT services firms, Cognizant uses a global delivery model based on offshore R&D and offshore outsourcing. While 80% of its revenue comes from North America, most of its workforce is in India.

If you are going to outsource, India is a good place to go given its highly-skilled, cheap, and English-speaking workforce. Like its India rivals Tata Consultancy Services and Infosys (INFY), Cognizant gets its biggest chunk of revenue from financial services clients. Cognizant has more than 150,000 employees globally, of which over 100,000 are in India across 10 different locations. In addition to India, Cognizant has 9 U.S. delivery centers, and more global delivery centers in the UK, Hungary, China, The Philippines, Canada, Brazil, Argentina, and Mexico.

Why invest in India? India’s economy is recovering from its weakest period of growth for decades. Thanks to new government policy reforms and low oil prices, India is on track to pass up China as the world’s fastest growing economy by 2016. These favorable economic trends are pushing India’s stock market higher. Over the last year, the India stock market (INDA) is up 42%. The stock broke out last fall and continues to keep breaking out. Finally, thanks to favorable economics, Cognizant finally has the wind at its back.

Investors can invest in an India mutual fund or ETF, or they can invest in a U.S.-based company like Cognizant which has exposure to India. Cognizant is gaining market share versus the likes of IBM (IBM) and Accenture (ACN), plus the stock is a way to gain exposure to the favorable economic trends bolstering India.

So let’s take a closer look at the stock.

Cognizant Technology Solutions is a Large Cap stock with a market capitalization of $35.2 billion. Its Risk Profile is Conservative. I am long in my Conservative Growth accounts.

Data from Best Stocks Now app

With a trailing P/E of 25 and a forward P/E of 19, Cognizant earns a Value Grade of B. But with a 5 year growth rate of 17%, this stock is more of a growth than value play.

Data from Best Stocks Now app

Data from Best Stocks Now app

Over the last year, Cognizant has outpaced the S&P 500 by 3% with a return of 19.3%. YTD, Cognizant has been a winner, up almost 10% versus a flat to down return for the Index. The stock earns a Momentum Grade of A and a Performance Grade of B+. This stock has been a consistent outperformer.

Data from Best Stocks Now app

Cognizant receives a Stock Grade of A- which means it is a Buy. It ranks #85 out of more than 3900 stocks in the Best Stocks Now universe. Cognizant is a strong performer in its own right, but combine that with the appreciation potential of India and this stock looks even more attractive.

[Chuzzlewit]

Exactly why I left my last job as a business analyst at HealthNet in Lis Angeles. HealthNet outsourced our entire operations dept to (sold) to them. We were given a 2 year time frame for layoff. I left before it begins the transition in July this year to have a one up on a new job. Severance was very generous so I took a big chance. But you can’t just sit around and wait for things to happen, you know? So I now work for the city health plan, whose new claims operating system is developed by guess who, trizzeto. They are owned by cognizant. At least not working FOR them. They work for us. But it’s a city job and I never thought that was in the cards for me.