Cognizant Technology

This is our first report on IT services major, Cognizant Technology Solutions. The company’s stock price has seen a heavy correction over time and one of the biggest factors responsible for the valuation multiple contraction is the flat growth trajectory. The company is focused on margin expansion. In spite of some challenges in navigating the labor markets of today as well as macro demand uncertainty in financial services, Cognizant has made progress in strengthening client relationships. It generates close to 90% of its revenue from existing clients which is one of the factors responsible for the slow growth. It continues to work on its fair share of industry partnerships. The last quarterly result of Cognizant was not too bad as it met revenue expectations of Wall Street and delivered an earnings beat. We initiate coverage on the stock of Cognizant Technology with an ‘Outperform’ rating.