When most people think of tech companies, they think of products, whether software or hardware.
Today’s daily stock pick is a tech company that doesn’t have products, but offers tech-related services instead.
Now, this kind of business model inherently has a lack of scalability, meaning it’s unlikely to become a trillion-dollar company.
But it doesn’t mean you can’t make a nice profit from owning this stock.
Because you see, even though this company has demonstrated steady earnings growth over the past few years, that has not been reflected in its stock price.
Obviously, services tech companies aren’t as exciting as product-based ones (they’re the ugly ducklings), so the lack of media attention may have also artificially kept its stock price down.
The good news is that, despite being a services company, there’s a VERY good chance the company will soon benefit from the AI tailwinds as well…
And we all know that the media LOVES to report on AI – meaning the stock could doubly benefit both from the media attention and the actual AI catalyst as well.
Cognizant Technology Solutions Corporation (CTSH)
Cognizant is in the tech consulting business, beginning as an in-house tech unit of Dun & Bradstreet before being spun off and going public in 1998.
From 2019 to 2022, it’s been able to grow its earnings per share from $3.30 to $4.42. Now, that’s not a super impressive growth metric by any means (it comes out to just over 10% each year).
But that growth has not been reflected in its stock price, which has remained largely flat over that same period.
The good news is that Cognizant has just inked a deal with ServiceNow to help clients adopt AI-automation solutions – a red-hot market right now.
Every company is scrambling to make sure they don’t get left behind in the AI race, and this could be a big catalyst for Cognizant.
Combine this with its price growth severely lagging its earnings growth – plus the fact that Cognizant’s stock has momentum on its side, having increased nearly 17% this year – and you have an overlooked tech stock with major upside potential.
To your wealth,
Felix @ Ace of Investing