Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Cognizant Technology Solutions Corporation's cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 6.1% to 3.3% annually, with expenses (COGS, SG&A, R&D) held at historical ratios. Depreciation is computed from a vintage matrix based on a 5-year useful life. Working capital is modeled using historical turnover days (DSO 73, DPO 10, DIO 60). At a 9.0% WACC with mid-year discounting, the terminal value (79% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 11.0x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $97.16 per share, suggesting CTSH is undervalued by 59.9% at the current price of $60.75.
Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.
| 2026 | 2027 | 2028 | 2029 | 2030 | Terminal | |
|---|---|---|---|---|---|---|
| Profit Before Tax | 4,027 | 4,240 | 4,509 | 4,449 | 4,597 | 4,712 |
| (−) Net Interest | 36 | 38 | 40 | 40 | 41 | 42 |
| (+) D&A | 303 | 316 | 322 | 337 | 354 | 362 |
| EBITDA | 4,366 | 4,594 | 4,872 | 4,825 | 4,992 | 5,117 |
| (−) Tax | 1,101 | 1,159 | 1,232 | 1,216 | 1,256 | — |
| (−) CapEx | 346 | 364 | 387 | 382 | 395 | — |
| (−) ΔWC | 2,337 | 342 | 432 | -97 | 239 | — |
| Free Cash Flow (FCF) | 582 | 2,729 | 2,820 | 3,324 | 3,102 | — |
| Peers' EBITDA Multiple | 11.0x | |||||
| Terminal Value | 56,491 | |||||
| WACC / Discount Rate | 9.01% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 558 | 2,398 | 2,273 | 2,458 | 2,104 | 36,703 |
| Enterprise Value | 46,494 | |||||
| Projection Period | 9,791 | 21.1% | ||||
| Terminal Value | 36,703 | 78.9% | ||||
| (−) Current Net Debt | (326) | |||||
| Equity Value | 46,820 | |||||
| (÷) Outstanding Shares | 482M | |||||
| Fair Price | $97 | +59.9% | ||||
| WACC \ EV/EBITDA Exit Multiple | 7.0x | 9.0x | 11.0x | 13.0x | 15.0x |
|---|---|---|---|---|---|
| 7.0% | $75 | $91 | $106 | $121 | $136 |
| 8.0% | $72 | $87 | $101 | $116 | $130 |
| 9.0% | $70 | $83 | $97 | $111 | $125 |
| 10.0% | $67 | $80 | $93 | $106 | $120 |
| 11.0% | $64 | $77 | $90 | $102 | $115 |
Current price: $60.75. Green = undervalued, Red = overvalued.
Based on default parameters
This is an unlevered Free Cash Flow to Firm (FCFF) model with a 5-year projection period. Revenue, expenses, D&A, and working capital are projected using the same line-by-line approach as the Growth Exit models. The key difference is the terminal value methodology: instead of assuming perpetual cash flow growth, the terminal value is calculated by applying the industry peer median EV/EBITDA multiple to the projected Year 6 EBITDA.
Using a peer exit multiple anchors the terminal value to how the market currently prices comparable companies, rather than relying on a theoretical perpetual growth assumption. This approach captures relative valuation dynamics and is particularly useful when a company is expected to converge toward industry-average profitability over time. The sensitivity matrix shows how fair value changes across different WACC and EV/EBITDA multiple scenarios.