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Understanding Cognizant’s Value Proposition in the IT Consulting Space

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Cognizant’s scale in the software space

Now let’s look at the value proposition of the Cognizant (CTSH) in the IT (information technology) consulting subsector. On November 30, 2016, International Business Machines (IBM) was the largest player by market capitalization in this space, followed by Accenture (ACN). Cognizant, India-based (EPI) Infosys, Wipro, and Teradata (TDC)—all of which are prominent players.
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Cognizant’s enterprise value multiples

Cognizant’s forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple was ~9.34x on November 30, 2016. This metric is lower than Accenture’s multiple of ~11.69x and higher than IBM’s multiple of 9.20x. Teradata’s forward EV-to-EBITDA multiple stood at ~6.74x as of the same date.

Cognizant’s dividend yield

IBM’s forward annual dividend yield was ~3.4% on November 30, 2016. Accenture’s and Wipro’s forward dividend yields were ~2.02 and ~1.9%, respectively. Notably, Cognizant doesn’t pay dividends.

In the next and final part of our series, we’ll see what kind of recommendations analysts have for Cognizant.

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