Infosys (NYSE:INFY) and Cognizant Technology Solutions (NASDAQ:CTSH) are both large-cap computer and technology companies, but which is the superior investment? We will compare the two companies based on the strength of their profitability, earnings, valuation, analyst recommendations, risk, institutional ownership and dividends.
Valuation and Earnings
This table compares Infosys and Cognizant Technology Solutions' gross revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
---|
Infosys | $12.78 billion | 5.93 | $2.33 billion | $0.55 | 32.45 |
Cognizant Technology Solutions | $16.78 billion | 2.36 | $1.84 billion | $3.99 | 18.69 |
Infosys has higher earnings, but lower revenue than Cognizant Technology Solutions. Cognizant Technology Solutions is trading at a lower price-to-earnings ratio than Infosys, indicating that it is currently the more affordable of the two stocks.
Analyst Ratings
This is a summary of recent ratings and price targets for Infosys and Cognizant Technology Solutions, as reported by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
---|
Infosys | 1 | 4 | 4 | 1 | 2.50 |
Cognizant Technology Solutions | 3 | 8 | 13 | 0 | 2.42 |
Infosys currently has a consensus target price of $12.6250, indicating a potential downside of 29.35%. Cognizant Technology Solutions has a consensus target price of $77.9048, indicating a potential upside of 4.32%. Given Cognizant Technology Solutions' higher probable upside, analysts plainly believe Cognizant Technology Solutions is more favorable than Infosys.
Dividends
Infosys pays an annual dividend of $0.27 per share and has a dividend yield of 1.5%. Cognizant Technology Solutions pays an annual dividend of $0.96 per share and has a dividend yield of 1.3%. Infosys pays out 49.1% of its earnings in the form of a dividend. Cognizant Technology Solutions pays out 24.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Cognizant Technology Solutions has raised its dividend for 1 consecutive years.
Profitability
This table compares Infosys and Cognizant Technology Solutions' net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
---|
Infosys | 19.06% | 27.65% | 19.45% |
Cognizant Technology Solutions | 8.78% | 19.04% | 11.79% |
Institutional and Insider Ownership
16.3% of Infosys shares are owned by institutional investors. Comparatively, 87.7% of Cognizant Technology Solutions shares are owned by institutional investors. 22.4% of Infosys shares are owned by company insiders. Comparatively, 0.3% of Cognizant Technology Solutions shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.
Risk and Volatility
Infosys has a beta of 0.86, indicating that its share price is 14% less volatile than the S&P 500. Comparatively, Cognizant Technology Solutions has a beta of 1.12, indicating that its share price is 12% more volatile than the S&P 500.
Summary
Infosys beats Cognizant Technology Solutions on 10 of the 18 factors compared between the two stocks.