Pat McKeough responds to many personal questions on stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on a selection of the most intriguing questions of the past week go out to all Inner Circle members. And every Friday, we offer you one of the highlights from these Q&A sessions.
A question this week touched on the well-established trend of overseas outsourcing. Specifically, an Inner Circle member asked about a leading specialist in the field with rising sales and profits and a large store of cash.
Q: Could I please have your opinion on Cognizant Technologies? Thank you.
A: Cognizant Technology Solutions (symbol on CTSH on Nasdaq; www.cognizant.com), helps businesses outsource their information technology functions. Cognizant’s services are provided by professionals who work with the client and in conjunction with development centres that are mainly located in India. Cognizant’s workforce includes over 130,000 employees.
With offshore outsourcing, companies in the U.S. and other developed countries can send their information technology-related work to countries like India, which have political stability and lower labour costs.
This is particularly common with, for instance, the help desks of software providers and cellular phone companies. High-speed Internet connections and the falling cost of long-distance telephone calling make it possible for information technology outsourcing to be carried out anywhere in the world.
As a member of my Inner Circle, you will get individual answers to your personal investment questions. And you will see my answers to questions other investors like you are asking. In fact, you will get virtually all the investment advice I have to give. You will have access to all of our advisories – The Successful Investor, Wall Street Stock Forecaster, Stock Pickers Digest and Canadian Wealth Advisor – and full access to the members-only, password-protected Inner Circle section of The Successful Investor Network website.
Although my team carefully researches all the stocks that members ask about, I personally review each and every recommendation. To ensure this close personal attention, only a limited number of members can be admitted to our Inner Circle. Under the pressure of world events, even more investors are asking for my personal investment advice. We are nearing our membership limit already. Click here to secure your membership in the Inner Circle right away.
Growth stocks: Cognizant looks for growing demand to offset stiffer competition
Cognizant gets its revenue from customers in the following industries: financial services (42%), healthcare services (26%), retail/manufacturing/logistics (18%) and other (14%).
In the three months ended September 30, 2011, this growth stock’s revenue rose 31.6%, to $1.6 billion from $1.2 billion. Earnings rose 11.5%, to $227.1 million, or $0.75 a share, from $203.7 million, or $0.68 a share. Cognizant holds cash of $2.3 billion, or $7.44 a share, and has no debt.
Demand for Cognizant’s services will likely continue to rise across most industries and geographic regions (especially emerging markets). In addition, Cognizant will likely continue to add new services, including through small acquisitions.
However, wages are rising in India, and competition is intensifying from global rivals, including IBM, Tata, Accenture and others.
You can see Pat’s assessment of this company’s opportunities and risks and his buy-hold-sell analysis on Cognizant Technologies — and other growth stocks — in this week’s Inner Circle Q&A.
Inner Circle members see Pat’s analysis and recommendations on the stocks other members have asked about in each week’s Inner Circle Q&A. You can view it immediately when you become a member of this special investment group. You will get Pat McKeough’s answers to your personal investment questions, full access to our members-only Inner Circle website, and many other membership privileges. Click here to get started right away.
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