Cognizant (CTSH) fell 11% on May 3 to close trading at $59.25. The stock fell close to 8% on May 2 as well and is now down 18.8% this month. This drop in price means Cognizant stock is currently trading 2.7% above its 52-week low and 29% below its 52-week high of $83.35.
Cognizant announced its first-quarter results last week and disappointed on earnings and sales figures as well as lower guidance for 2019. Cognizant reported sales of $4.11 billion with adjusted EPS of $0.94, which was below Wall Street average estimates.
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Analysts expected Cognizant to post revenue of $4.17 billion and earnings of $1.03 in the first quarter. Cognizant further lowered its sales outlook for 2019 and attributed the guidance cut to a slowdown in its financial services and healthcare business segments. Cognizant has revised sales estimates to between 3.6% and 5.1% YoY down from its prior estimates of 7% to 9%.
Is Cognizant trading at an attractive valuation?
Now that Cognizant stock has dropped significantly, does that make it an attractive bet? Cognizant is trading at a forward PE multiple of 12.12x. In comparison, the company’s earnings are estimated to fall 2.4% in 2019, which is not very encouraging news for investors.
Wall Street, however, remains optimistic. Out of 33 analysts covering Cognizant, 24 recommend a “buy” and nine recommend a “hold.” There are no “sell” recommendations. The average 12-month price target for Cognizant is $81.48, indicating the stock is trading at a discount of 38% to average estimates.