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GuruFocus has detected 5 Warning Signs with Cognizant Technology Solutions Corp $CTSH.
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Cognizant Technology Solutions Corp (NAS:CTSH)
Piotroski F-Score
5 (As of Today)

The zones of discrimination were as such:

Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3

Cognizant Technology Solutions Corp has an F-score of 5 indicating the company's financial situation is typical for a stable company.

CTSH' s Piotroski F-Score Range Over the Past 10 Years
Min: 3   Max: 8
Current: 5

3
8

During the past 13 years, the highest Piotroski F-Score of Cognizant Technology Solutions Corp was 8. The lowest was 3. And the median was 5.


Definition

How is the Piotroski F-Score calculated?

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Mar17) TTM:Last Year (Mar16) TTM:
Net Income was 252.4 + 444.4 + 415 + 557 = $1,669 Mil.
Cash Flow from Operations was 356.4 + 594 + 598.6 + 277 = $1,826 Mil.
Revenue was 3369.9 + 3453.2 + 3461.9 + 3546 = $13,831 Mil.
Gross Profit was 1332.2 + 1375.8 + 1384.4 + 1352 = $5,444 Mil.
Average Total Assets from the begining of this year (Mar16)
to the end of this year (Mar17) was
(12735.9 + 13140.1 + 13716.7 + 14262 + 13629) / 5 = $13496.74 Mil.
Total Assets at the begining of this year (Mar16) was $12,736 Mil.
Long-Term Debt was $772 Mil.
Total Current Assets was $7,842 Mil.
Total Current Liabilities was $2,585 Mil.
Net Income was 420.1 + 397.2 + 423.8 + 441 = $1,682 Mil.

Revenue was 3085.1 + 3187 + 3232.5 + 3202 = $12,707 Mil.
Gross Profit was 1240.3 + 1252.4 + 1299.1 + 1287 = $5,079 Mil.
Average Total Assets from the begining of last year (Mar15)
to the end of last year (Mar16) was
(11383.4 + 11797.6 + 12267.6 + 13061 + 12735.9) / 5 = $12249.1 Mil.
Total Assets at the begining of last year (Mar15) was $11,383 Mil.
Long-Term Debt was $858 Mil.
Total Current Assets was $7,571 Mil.
Total Current Liabilities was $2,050 Mil.

Profitability

Question 1. Return on Assets (ROA)

Net income before extraordinary items for the year divided by total assets at the beginning of the year.

Score 1 if positive, 0 if negative.

Cognizant Technology Solutions Corp's current net income (TTM) was 1,669. ==> Positive ==> Score 1.

Question 2. Cash Flow Return on Assets (CFROA)

Net cash flow from operating activities (operating cash flow) divided by total assets at the beginning of the year.

Score 1 if positive, 0 if negative.

Cognizant Technology Solutions Corp's current cash flow from operations (TTM) was 1,826. ==> Positive ==> Score 1.

Question 3. Change in Return on Assets

Compare this year’s return on assets (1) to last year’s return on assets.

Score 1 if it’s higher, 0 if it’s lower.

ROA (This Year)=Net Income (TTM)/Total Assets at the Beginning of This Year (Mar16)
=1668.8/12735.9
=0.13103118

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Mar15)
=1682.1/11383.4
=0.1477678

Cognizant Technology Solutions Corp's return on assets of this year was 0.13103118. Cognizant Technology Solutions Corp's return on assets of last year was 0.1477678. ==> Last year is higher ==> Score 0.

Question 4. Quality of Earnings (Accrual)

Compare Cash flow return on assets (2) to return on assets (1)

Score 1 if CFROA > ROA, 0 if CFROA <= ROA.

Cognizant Technology Solutions Corp's current net income (TTM) was 1,669. Cognizant Technology Solutions Corp's current cash flow from operations (TTM) was 1,826. ==> 1,826 > 1,669 ==> CFROA > ROA ==> Score 1.

Funding

Question 5. Change in Gearing or Leverage

Compare this year’s gearing (long-term debt divided by average total assets) to last year’s gearing.

Score 0 if this year's gearing is higher, 1 otherwise.

Gearing (This Year: Mar17)=Long-Term Debt/Average Total Assets from Mar16 to Mar17
=772/13496.74
=0.057199

Gearing (Last Year: Mar16)=Long-Term Debt/Average Total Assets from Mar15 to Mar16
=858.4/12249.1
=0.07007862

Cognizant Technology Solutions Corp's gearing of this year was 0.057199. Cognizant Technology Solutions Corp's gearing of last year was 0.07007862. ==> This year is lower or equal to last year. ==> Score 1.

Question 6. Change in Working Capital (Liquidity)

Compare this year’s current ratio (current assets divided by current liabilities) to last year’s current ratio.

Score 1 if this year'’s current ratio is higher, 0 if it’s lower

Current Ratio (This Year: Mar17)=Total Current Assets/Total Current Liabilities
=7842/2585
=3.03365571

Current Ratio (Last Year: Mar16)=Total Current Assets/Total Current Liabilities
=7570.9/2050.4
=3.69240148

Cognizant Technology Solutions Corp's current ratio of this year was 3.03365571. Cognizant Technology Solutions Corp's current ratio of last year was 3.69240148. ==> Last year's current ratio is higher ==> Score 0.

Question 7. Change in Shares in Issue

Compare the number of shares in issue this year, to the number in issue last year.

Score 0 if there is larger number of shares in issue this year, 1 otherwise.

Cognizant Technology Solutions Corp's number of shares in issue this year was 607. Cognizant Technology Solutions Corp's number of shares in issue last year was 612. ==> There is smaller number of shares in issue this year, or the same. ==> Score 1.

Efficiency

Question 8. Change in Gross Margin

Compare this year’s gross margin (gross profit divided by sales) to last year’s.

Score 1 if this year’s gross margin is higher, 0 if it’s lower.

Gross Margin (This Year: TTM)=Gross Profit/Revenue
=5444.4/13831
=0.39363748

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=5078.8/12706.6
=0.39969779

Cognizant Technology Solutions Corp's gross margin of this year was 0.39363748. Cognizant Technology Solutions Corp's gross margin of last year was 0.39969779. ==> Last year's gross margin is higher ==> Score 0.

Question 9. Change in asset turnover

Compare this year’s asset turnover (total sales for the year divided by total assets at the beginning of the year) to last year’s asset turnover ratio.

Score 1 if this year’s asset turnover ratio is higher, 0 if it’s lower

Asset Turnover (This Year)=Revenue (TTM)/Total Assets at the Beginning of This Year (Mar16)
=13831/12735.9
=1.08598529

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Mar15)
=12706.6/11383.4
=1.11623944

Cognizant Technology Solutions Corp's asset turnover of this year was 1.08598529. Cognizant Technology Solutions Corp's asset turnover of last year was 1.11623944. ==> Last year's asset turnover is higher ==> Score 0.

Evaluation

Piotroski F-Score= Que. 1+ Que. 2+ Que. 3+Que. 4+Que. 5+Que. 6+Que. 7+Que. 8+Que. 9
=1+1+0+1+1+0+1+0+0
=5

Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3

Cognizant Technology Solutions Corp has an F-score of 5 indicating the company's financial situation is typical for a stable company.


Explanation

The developer of the system is Joseph D. Piotroski is relatively unknown accounting professor who shuns publicity and rarely gives interviews.

He graduated from the University of Illinois with a B.S. in accounting in 1989, received an M.B.A. from Indiana University in 1994. Five years later, in 1999, after earning a Ph.D. in accounting from the University of Michigan, he became an associate professor of accounting at the University of Chicago.

In 2000, he wrote a research paper called "Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers" (pdf).

He wanted to see if he can develop a system (using a simple nine-point scoring system) that can increase the returns of a strategy of investing in low price to book (referred to in the paper as high book to market) value companies.

What he found was something that exceeded his most optimistic expectations.

Buying only those companies that scored highest (8 or 9) on his nine-point scale, or F-Score as he called it, over the 20 year period from 1976 to 1996 led to an average out-performance over the market of 13.4%.

Even more impressive were the results of a strategy of investing in the highest F-Score companies (8 or 9) and shorting companies with the lowest F-Score (0 or 1).

Over the same period from 1976 to 1996 (20 years) this strategy led to an average yearly return of 23%, substantially outperforming the average S&P 500 index return of 15.83% over the same period.


Related Terms

Net Income, Cash Flow from Operations, Revenue, Gross Profit, Total Assets, Long-Term Debt, Total Current Assets, Total Current Liabilities


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Cognizant Technology Solutions Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Question 1 1111111111
Question 2 1111111111
Question 3 0000000000
Question 4 0011011111
Question 5 1111111011
Question 6 0101010011
Question 7 1100110011
Question 8 0100000000
Question 9 0000001000
F-score 4645465366

Cognizant Technology Solutions Corp Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
Question 1 1111111111
Question 2 1111111111
Question 3 0000000000
Question 4 1111111111
Question 5 0000111111
Question 6 0000111110
Question 7 0000111111
Question 8 0000000000
Question 9 0000000000
F-score 3333666665
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