Cognizant Jumps as Accenture Results Ease IT Spending Concerns

• Our read: EasyAlpha grades Cognizant Technology Solutions Corp Class A B, upgraded from D, as attractive valuation balances slower growth relative to industry peers.
• The day: The shares jumped 6.0% to $60.88 as strong results from Accenture lifted the broader IT services sector.
• Watching: Scheduled quarterly earnings on Wednesday, November 4.

Shares of Cognizant rallied on Thursday, October 1, lifted by a sector-wide advance across information technology services after Accenture reported fourth-quarter financial results. The report and Accenture's revenue guidance for the coming fiscal year helped ease broader investor concerns over potential artificial intelligence disruption across labor-intensive technology services businesses, lifting software and IT services peers.

The sector move sparked elevated trading in Cognizant, with volume reaching 2.1x its 20-session average. The session extended a three-session winning run that brought the stock to +6.5% over the past week. Even with that advance, the shares remain -26.7% so far this year and sit 28.8% below their 52-week high.

EasyAlpha grades Cognizant B, an improvement from D. In historical data across industry peers, companies graded A or B have demonstrated stronger fundamentals and lower risk of large drawdowns than those graded D or E. Cognizant scores highest in valuation, trading at a trailing price-to-earnings ratio of 12.3 and a forward multiple of 9.4.

The primary restraint in the company's file is growth. Latest quarterly revenue growth stood at +4.5% year over year. Among Wall Street analysts covering the stock, 44.8% of the 29 ratings are buys.