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If you can’t beat em…join em.
The level of dismay about American companies moving jobs to foreign countries may have subsided, but the practice of outsourcing still perseveres. Don’t get mad – get rich.
IBM’s total US workforce has shrunk by 20% since 2005 but their total headcount has actually increased over the same period….ah ha! Look…any reasonable person knows that you can’t sustain high wage employment if someone else is willing to do the same job, with the same productivity for less money. You can’t fight the invisible hand of the market. So you might as well invest in companies that are making money off of this trend. Cognizant Technology has steadily grown its net income in recent years by using well-educated, low-paid information technology services workers mainly in India. It develops customized software programs to manage inventory, customer databases or whatever a company needs to run its business. If a company doesn't have its own geeks, it hires Cognizant, which has tech wizards in India and other countries where skilled workers come at a discount vs. U.S. talent.
Today I bought stock in Cognizant (CTSH) at 53.85. I will sell it in 4 – 6 weeks at 62.47. Here’s why I like CTSH:
My goodness look at the chart!! All this stock wants to do is go up. It’s shares are up 145% in the last 52 weeks with the highest of R^2 correlation coefficients. The PE is a little high for my tastes – 30 – but when you look at its earnings growth..faggeddabouddit!
The stock lost 70% of its value in the bear market, but has scrambled to just below its all-time high in the uptrend that began in March 2009.
Cognizant is the youngest and smallest of the major offshore Indian outsourcers. But it makes up for the differences by trying harder. It enjoys growth rates that are the fastest in its peer group and a track record that gets high marks for execution.
Cognizant, begun as an arm of Dun & Bradstreet in 1994 and publicly traded as a stand-alone firm since 1998, purposely keeps operating margins in the 18% to 20% range through thick and thin. Unlike many of its rivals, its corporate headquarters is not actually in India but in Teaneck, N.J. Most of its employees work from India.
It's been expanding from traditional applications software programming to data analytics, infrastructure services, business consulting and business processing, such as fund accounting and transactions. More managers are turning to outsourcing firms like Cognizant in an effort to keep a lid on IT costs. But CTSH is also looking to hire senior consultants and more employees who can visit with clients to differentiate them from the typical programming or back office processing outsourcing firms.
Many rivals have reduced their payrolls to save costs during the global recession. Not Cognizant. They keep growing and growing their employee ranks and are now up to 78,000 worldwide. Because of their investments, they are well positioned to feast on this global recovery. Cognizant is growing revenue in high end consulting by 20% to 25% a year, about twice as fast as total revenue. Cognizant plans to keep adding new service offerings, widen the number of industries it serves and expand into new locales in the Asia-Pacific, the Middle East and elsewhere. The company saw growth across all industry sectors, locations and service lines. Customers are coming to Cognizant, hoping to cut costs.
Cognizant has a slightly different structure than its India-based rivals. Its top managers are based in New Jersey, while most of its tech professionals work in India and elsewhere. It says this gives it a kind of hybrid identity that appeals to clients in North America, which provided 79% of revenue last year. 90% of the company's revenues come from repeat business, which keeps selling costs low.
While most companies cut spending and services in the recession, Cognizant expanded operations in Asia, Eastern Europe and Latin America. The information technology outsourcer bought five consulting firms serving five industries: health care, media, retail, technology and financial. Buy straw hats in the winter..summer always comes.
INFY, one of CTSH’s competitors offered a strong outlook for the year, indicating a revival in India's outsourcing industry, and is continuing to gather momentum. An ANAL-yst suggested the information-technology outsourcing provider should benefit as customers sign 2010 budgets early this year. CTSH makes INFY its girlfriend. Cognizant, as the fastest-growing name in this industry, should be all happy about INFY’s news. In February CTSH projected 2010 results well above estimates. 42% of CTSH’s revenues are financial services…and this area is really rallying and will be a big lift to Cognizant’s earnings.
India's outsourcing firms will gain new orders from the U.S. overhauling of their healthcare system, which could call for insurers and healthcare providers to cut expenses. ANAL-ysts expect the U.S. government to spend about $15 billion to $20 billion on healthcare technology a major share of which is expected to come to the Indian business process outsourcing companies.
CTSH has a unique management chain of command. Instead of one manager having responsibility for key milestones, it was shared by two — one at the customer end and the other on the offshore delivery side. The structure worked very well for Cognizant, helping it grow and sometimes grow faster than its bigger offshore peers. The company eventually went on to trademark what it called ‘two-in-a-box’ structure. Now they have stuck in a consultant to make it a ‘three-in-a-box’ structure. Of course all of these services get billed out to the customer. The goal of Cognizant’s three-in-a-box programme is to use consulting to become a trusted advisor to the client and fundamentally change how clients relate to the firm and the work they do with it. The consulting services are charged at a premium.
So..what does it look like in dollars and sense?
In February, CTSH announced their fourth Q and full year 2009 financial results.
For the year:
First Quarter & Full Year 2010 Outlook
The Company is providing the following guidance:
That’s what the company says. What do the ANAL-ysts say? The ANAL-ysts, to no surprise, have not deviated much from what the company says. They predict Q1 earnings of $0.48/share and FY2010 earnings of $2.07/share. These estimates are based on revenue estimates of $938 million for the quarter and $3.99 billion for the year. Balderdash says $$$MR. MARKET$$$.
CTSH…CTSH >>> These guys are SMOKING! They are SMOKING like me at the high rollers pit in the Mirage, drinking Johnny Walker BLUUUEE with Titan Omega and SMOKING Partegas cigars as long as my arm.
$$$MR. MARKET$$$ sees excellent 2010 profits of $2.33 per share on revenues of $4.2 billion. Why do I say this? Return on Assets is 19.17%. The average ROA for this Industry Group is 2.57%. The Operating Cash Flow was Positive for the last three years…even during the depressed global environment. The ROE is 27.56%. The average ROE for this Industry Group is 6.47%. That’s right….SMOKIN. The year 2011 will be even more ridiculous..but who needs to wait that long?
If you take my estimated profits of $2.33/share and multiply by the PE ration of 30, it gets you to a share price of $69.90 which is already greater than my target sale price.
What do the bosses think?
"Cognizant delivered exceptional performance in 2009. A continued focus on operational excellence, combined with aggressive hiring in the latter part of last year, leaves us well positioned for a strong 2010," said Gordon Coburn, Chief Financial and Operating Officer. "In addition, we further strengthened our balance sheet in 2009 with our cash, short- and long-term investments increasing by over $210 million during the fourth quarter, and over $625 million for the full year, to a total of approximately $1.55 billion."
"I am an example of what's possible when countries have smart, progressive immigration policies that embrace immigrants," he said. "Immigration has enabled the success of Cognizant and enabled the success of our clients."
"Despite a very difficult economy, Cognizant delivered strong results with 16% annual revenue growth. The investments we made in our business leave us in an even stronger position than when we entered 2009," said Francisco D'Souza, President and CEO of Cognizant. "During the year, we grew our workforce by more than 16,700 people, improved our employee utilization, strengthened our client partnerships, and brought new services and capabilities to market. We believe Cognizant is set to deliver robust performance in 2010 and will continue to set new standards for our industry."
Yea…lets robust that crap into my bank account boys. If you can’t beat em, join em!
Let me know if you liked this write up.
I am HUGE!!
$$$MR. MARKET$$$
www.mrmarketishuge.com
The level of dismay about American companies moving jobs to foreign countries may have subsided, but the practice of outsourcing still perseveres. Don’t get mad – get rich.
IBM’s total US workforce has shrunk by 20% since 2005 but their total headcount has actually increased over the same period….ah ha! Look…any reasonable person knows that you can’t sustain high wage employment if someone else is willing to do the same job, with the same productivity for less money. You can’t fight the invisible hand of the market. So you might as well invest in companies that are making money off of this trend. Cognizant Technology has steadily grown its net income in recent years by using well-educated, low-paid information technology services workers mainly in India. It develops customized software programs to manage inventory, customer databases or whatever a company needs to run its business. If a company doesn't have its own geeks, it hires Cognizant, which has tech wizards in India and other countries where skilled workers come at a discount vs. U.S. talent.
Today I bought stock in Cognizant (CTSH) at 53.85. I will sell it in 4 – 6 weeks at 62.47. Here’s why I like CTSH:
My goodness look at the chart!! All this stock wants to do is go up. It’s shares are up 145% in the last 52 weeks with the highest of R^2 correlation coefficients. The PE is a little high for my tastes – 30 – but when you look at its earnings growth..faggeddabouddit!
The stock lost 70% of its value in the bear market, but has scrambled to just below its all-time high in the uptrend that began in March 2009.
Cognizant is the youngest and smallest of the major offshore Indian outsourcers. But it makes up for the differences by trying harder. It enjoys growth rates that are the fastest in its peer group and a track record that gets high marks for execution.
Cognizant, begun as an arm of Dun & Bradstreet in 1994 and publicly traded as a stand-alone firm since 1998, purposely keeps operating margins in the 18% to 20% range through thick and thin. Unlike many of its rivals, its corporate headquarters is not actually in India but in Teaneck, N.J. Most of its employees work from India.
It's been expanding from traditional applications software programming to data analytics, infrastructure services, business consulting and business processing, such as fund accounting and transactions. More managers are turning to outsourcing firms like Cognizant in an effort to keep a lid on IT costs. But CTSH is also looking to hire senior consultants and more employees who can visit with clients to differentiate them from the typical programming or back office processing outsourcing firms.
Many rivals have reduced their payrolls to save costs during the global recession. Not Cognizant. They keep growing and growing their employee ranks and are now up to 78,000 worldwide. Because of their investments, they are well positioned to feast on this global recovery. Cognizant is growing revenue in high end consulting by 20% to 25% a year, about twice as fast as total revenue. Cognizant plans to keep adding new service offerings, widen the number of industries it serves and expand into new locales in the Asia-Pacific, the Middle East and elsewhere. The company saw growth across all industry sectors, locations and service lines. Customers are coming to Cognizant, hoping to cut costs.
Cognizant has a slightly different structure than its India-based rivals. Its top managers are based in New Jersey, while most of its tech professionals work in India and elsewhere. It says this gives it a kind of hybrid identity that appeals to clients in North America, which provided 79% of revenue last year. 90% of the company's revenues come from repeat business, which keeps selling costs low.
While most companies cut spending and services in the recession, Cognizant expanded operations in Asia, Eastern Europe and Latin America. The information technology outsourcer bought five consulting firms serving five industries: health care, media, retail, technology and financial. Buy straw hats in the winter..summer always comes.
INFY, one of CTSH’s competitors offered a strong outlook for the year, indicating a revival in India's outsourcing industry, and is continuing to gather momentum. An ANAL-yst suggested the information-technology outsourcing provider should benefit as customers sign 2010 budgets early this year. CTSH makes INFY its girlfriend. Cognizant, as the fastest-growing name in this industry, should be all happy about INFY’s news. In February CTSH projected 2010 results well above estimates. 42% of CTSH’s revenues are financial services…and this area is really rallying and will be a big lift to Cognizant’s earnings.
India's outsourcing firms will gain new orders from the U.S. overhauling of their healthcare system, which could call for insurers and healthcare providers to cut expenses. ANAL-ysts expect the U.S. government to spend about $15 billion to $20 billion on healthcare technology a major share of which is expected to come to the Indian business process outsourcing companies.
CTSH has a unique management chain of command. Instead of one manager having responsibility for key milestones, it was shared by two — one at the customer end and the other on the offshore delivery side. The structure worked very well for Cognizant, helping it grow and sometimes grow faster than its bigger offshore peers. The company eventually went on to trademark what it called ‘two-in-a-box’ structure. Now they have stuck in a consultant to make it a ‘three-in-a-box’ structure. Of course all of these services get billed out to the customer. The goal of Cognizant’s three-in-a-box programme is to use consulting to become a trusted advisor to the client and fundamentally change how clients relate to the firm and the work they do with it. The consulting services are charged at a premium.
So..what does it look like in dollars and sense?
In February, CTSH announced their fourth Q and full year 2009 financial results.
- Quarterly revenue rose to $902.7 million, up 20% from the year-ago quarter and 6% sequentially.
- Quarterly diluted EPS on a GAAP basis was $0.47, compared to $0.38 in the year-ago quarter.
- Net headcount additions for the quarter exceeded 10,300; year-end headcount approximately 78,400.
For the year:
- Revenue increased to $3.279 billion, up 16% from the previous year.
- Diluted EPS on a GAAP basis was $1.78, compared to $1.44 in the previous year.
First Quarter & Full Year 2010 Outlook
The Company is providing the following guidance:
- First quarter 2010 revenue anticipated to be at least $935 million.
- First quarter 2010 diluted EPS expected to be $0.48 on a GAAP basis
- Fiscal 2010 revenue expected to be at least $3.935 billion, up at least 20% compared to 2009.
- Fiscal 2010 diluted EPS expected to be at least $2.03 on a GAAP basis.
That’s what the company says. What do the ANAL-ysts say? The ANAL-ysts, to no surprise, have not deviated much from what the company says. They predict Q1 earnings of $0.48/share and FY2010 earnings of $2.07/share. These estimates are based on revenue estimates of $938 million for the quarter and $3.99 billion for the year. Balderdash says $$$MR. MARKET$$$.
CTSH…CTSH >>> These guys are SMOKING! They are SMOKING like me at the high rollers pit in the Mirage, drinking Johnny Walker BLUUUEE with Titan Omega and SMOKING Partegas cigars as long as my arm.
$$$MR. MARKET$$$ sees excellent 2010 profits of $2.33 per share on revenues of $4.2 billion. Why do I say this? Return on Assets is 19.17%. The average ROA for this Industry Group is 2.57%. The Operating Cash Flow was Positive for the last three years…even during the depressed global environment. The ROE is 27.56%. The average ROE for this Industry Group is 6.47%. That’s right….SMOKIN. The year 2011 will be even more ridiculous..but who needs to wait that long?
If you take my estimated profits of $2.33/share and multiply by the PE ration of 30, it gets you to a share price of $69.90 which is already greater than my target sale price.
What do the bosses think?
"Cognizant delivered exceptional performance in 2009. A continued focus on operational excellence, combined with aggressive hiring in the latter part of last year, leaves us well positioned for a strong 2010," said Gordon Coburn, Chief Financial and Operating Officer. "In addition, we further strengthened our balance sheet in 2009 with our cash, short- and long-term investments increasing by over $210 million during the fourth quarter, and over $625 million for the full year, to a total of approximately $1.55 billion."
"I am an example of what's possible when countries have smart, progressive immigration policies that embrace immigrants," he said. "Immigration has enabled the success of Cognizant and enabled the success of our clients."
"Despite a very difficult economy, Cognizant delivered strong results with 16% annual revenue growth. The investments we made in our business leave us in an even stronger position than when we entered 2009," said Francisco D'Souza, President and CEO of Cognizant. "During the year, we grew our workforce by more than 16,700 people, improved our employee utilization, strengthened our client partnerships, and brought new services and capabilities to market. We believe Cognizant is set to deliver robust performance in 2010 and will continue to set new standards for our industry."
Yea…lets robust that crap into my bank account boys. If you can’t beat em, join em!
Let me know if you liked this write up.
I am HUGE!!
$$$MR. MARKET$$$
www.mrmarketishuge.com
Investools has a projected price of $71.48. Nice spike in volume on Tuesday. Chalk another one up for the huge one.
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