66% Gains in Sight With This Global Tech Solutions Leader

|December 16, 2023

As the year comes to a rip-roaring close… it’s smart to look for stable companies that are growing yet undervalued.

That’s why you’re going to like this week’s Stock of the Week.

It’s a name you may recognize… as it’s a $35 billion global tech leader. It provides tech solutions across many industries, helping companies adapt and modernize.

Plus… it uses AI, 2023’s buzzword of the year.

But more than that… the company is looking at strong growth in its sales and earnings… has a healthy 15% cash return on capital invested – my favorite metric… and is surprisingly undervalued for its size and industry, with a forecast P/E ratio of just 15.9.

And the best part? I see a 60%-plus gain from here… in less than a year!

Prepare your portfolio for the new year with this solid play.

Get all the details on the company – including the ticker – in my latest video.

Click on the image below to watch it.

Transcript

Hello, friends… and welcome, Manward family, to my Stock of the Week.

Apologies, a slightly unusual background. I am in the Maldives. “Band on tour,” as it were, and there might be picks to go along with me doing drums.

But my analysis continues, and I’ve got another really good Stock of the Week for you.

This is Cognizant Technology Solutions. You might have heard of the company because obviously it’s rather big. It’s well-known. It ranked 185 on the Fortune 500 and listed consistently as one of the most admired companies.

So why now? And why such a well-known name anywhere as a Stock of the Week? The reason for that is this: The numbers are aligned. They’re looking particularly good compared to the share price. There’s upside… is what I see.

Now, they’ve got 300,000 people globally. 70% of those are in India, which is where I’ve just come back from, and the market cap is currently $35 billion.

One of the reasons I was in India was to look at technology companies generally, and so this fits in well. I mean, you might as well call it an Indian company.

Cognizant Technology Solutions is forecast to grow earnings and revenues by 9% and 5% per year, respectively. So great growth, good revenue growth. Their total revenue last quarter… well, second quarter of 2023… was $4.9 billion.

So it’s obviously a massive company, one you’ve heard of.

Why is the timing right now? Well, first of all, on my Growth-Value-Income rating, which is my proprietary scoring mechanism, it’s got an 8 out of 10. I weigh valuation, growth and dividend yields, and I look for companies with at least a 7 or more. This meets those criteria.

The forecast P/E ratio is 15.9, which for a technology company is pretty low. Because that’s the multiple of the share price, how much you’re paying in dollars. You’re paying $15.90 for every forecast, or expected, dollar in profits. That’s low. You’d normally expect to pay a bit more for good technology companies growing at the rate this one has. So I think it’s undervalued.

Cash return on capital invested… Remember, you can learn more about that right here. It is used by Goldman Sachs Wealth Management. Cognizant has a 15.3% cash return on capital invested.

Now, that’s a good number. That is putting it in the top quartile, which is what I want, companies in the top quartile. Because those generally, according to Goldman Sachs Wealth Management, generate about 30% per year. Not every company, not guaranteed, not every year… but on average, if they meet that criterion. So we want to tick that box, obviously.

Good momentum over the last six months.

Volatility is well below the 20% that I’d like to see. So that’s good. It’s a stable company in many ways. Now, when you look at the price, you might not think so. But volatility is one of those curious ones, and it’s not been extremely volatile at all.

The momentum, the monthly momentum, if I look at the charts, is starting to move upward, which is good. I’ve put a very optimistic projection on this of 66% over 12 months. In actual fact, I’d be happy with 44%… sorry, 40%… over 12 months on that nice little upward trend on the stock as well.

Discounted cash flows… We’ve got to be a bit careful. It’s only about 9.3% undervalued. So let’s not get too overexcited about this one.

Hopefully this has given you a “tip of the iceberg” analysis and insight into the kinds of things I look for with GVI Investor, and we go into a lot more depth and screen companies with very tight, stringent criteria.

But this gives you some idea of what’s been catching my attention and why.

Thank you very much indeed.