In today’s dynamic tech landscape, comparing Cognizant Technology Solutions Corporation (CTSH) and Zscaler, Inc. (ZS) offers valuable insights for investors. Both companies operate within the technology sector but focus on different niches—Cognizant in IT services and Zscaler in cloud security. Their innovative strategies and overlapping market interests position them uniquely. As we delve deeper into their performance and growth prospects, I aim to help you identify which company might be the more compelling investment opportunity for your portfolio.
Table of contents
Company Overview
Cognizant Technology Solutions Corporation Overview
Cognizant Technology Solutions (CTSH) is a prominent player in the information technology services sector, established in 1994 and headquartered in Teaneck, New Jersey. The company’s mission revolves around providing consulting, technology, and outsourcing services to enhance operational efficiency across various industries, including financial services, healthcare, and communications. With a strong workforce of approximately 336K employees, Cognizant emphasizes digital transformation through advanced analytics, AI, and automation, helping clients respond to market changes and improve customer experiences. As of now, Cognizant boasts a market capitalization of around $37.34B and trades on the NASDAQ.
Zscaler, Inc. Overview
Zscaler, Inc. is a cloud security pioneer founded in 2007 and based in San Jose, California. The firm specializes in providing secure access to cloud applications and services through its innovative solutions, including Zscaler Internet Access and Zscaler Private Access. Zscaler’s mission is to enable secure digital transformation for enterprises, allowing them to protect their assets while enhancing user experience. With a market capitalization of approximately $42.46B, Zscaler operates in an increasingly competitive landscape, focusing on sectors such as finance, healthcare, and technology.
Key similarities and differences in their business models include their focus on technology services—Cognizant offers a broader range of outsourcing and consulting services while Zscaler specializes in cloud security solutions. Both companies leverage their expertise to support digital transformation but target different client needs and operational frameworks.
Income Statement Comparison
The following table presents a comparison of the most recent income statements for Cognizant Technology Solutions Corporation (CTSH) and Zscaler, Inc. (ZS), allowing us to evaluate their financial performance.
| Metric | Cognizant Technology Solutions (CTSH) | Zscaler, Inc. (ZS) |
|---|---|---|
| Revenue | 19.74B | 2.67B |
| EBITDA | 3.53B | 0.11B |
| EBIT | 2.99B | -0.01B |
| Net Income | 2.24B | -0.04B |
| EPS | 4.52 | -0.27 |
Interpretation of Income Statement
In the latest fiscal year, Cognizant’s revenue grew slightly, contributing to a robust net income of 2.24B, showcasing strong operational efficiency with stable margins. In contrast, Zscaler faced challenges, with revenue growth but negative net income of 41.48M due to high operating expenses and ongoing investments in growth. Zscaler’s EBIT remains negative, indicating the firm is still in a critical investment phase, which may warrant caution for potential investors. As such, while Cognizant demonstrates stability and profitability, Zscaler’s path to profitability remains uncertain amidst its aggressive growth strategy.
Financial Ratios Comparison
In this section, I provide a comparative overview of the most recent financial ratios for Cognizant Technology Solutions Corporation (CTSH) and Zscaler, Inc. (ZS). This will help you better understand each company’s financial health and operational efficiency.
| Metric | Cognizant (CTSH) | Zscaler (ZS) |
|---|---|---|
| ROE | 15.55% | -2.31% |
| ROIC | 13.24% | -7.21% |
| P/E | 17.03 | -1063.01 |
| P/B | 2.65 | 24.51 |
| Current Ratio | 2.09 | 1.94 |
| Quick Ratio | 2.09 | 1.94 |
| D/E | 0.10 | 0.99 |
| Debt-to-Assets | 0.08 | 0.28 |
| Interest Coverage | 53.56 | -13.49 |
| Asset Turnover | 0.99 | 0.42 |
| Fixed Asset Turnover | 12.77 | 4.22 |
| Payout ratio | 26.79% | 0% |
| Dividend yield | 1.57% | 0% |
Interpretation of Financial Ratios
Cognizant’s financial ratios indicate a strong performance, particularly in profitability and solvency metrics such as ROE and interest coverage. In contrast, Zscaler shows negative returns on equity and investment, reflecting operational challenges. Additionally, Zscaler’s high P/B and negative P/E ratios raise concerns about valuation and market confidence. These factors warrant caution for potential investors considering Zscaler.
Dividend and Shareholder Returns
Cognizant Technology Solutions (CTSH) offers dividends with a payout ratio of 27.8%, providing a yield of approximately 1.57%. Its free cash flow comfortably covers these distributions, although investors should remain cautious of potential risks associated with unsustainable payouts. In contrast, Zscaler (ZS) does not pay dividends, focusing on reinvestment for growth during its early stage. Both companies engage in share buybacks, with CTSH’s approach supporting long-term value, while ZS’s strategy prioritizes growth over immediate returns.
Strategic Positioning
Cognizant Technology Solutions (CTSH) holds a significant position in the Information Technology Services sector, with a market cap of $37.3B. It faces competitive pressure from various tech firms and must continuously adapt to technological disruptions, particularly in AI and automation. Zscaler (ZS), valued at $42.5B, is a leader in cloud security, emphasizing the growing demand for secure access to applications. Both companies are navigating a rapidly evolving landscape with increasing competition and the need for innovative solutions.
Stock Comparison
In this section, I will analyze the stock price movements and trading dynamics of Cognizant Technology Solutions Corporation (CTSH) and Zscaler, Inc. (ZS) over the past year, highlighting key price changes and trends that may influence your investment decisions.
Trend Analysis
Cognizant Technology Solutions Corporation (CTSH) Over the past year, CTSH has experienced a price change of +0.6%. This slight increase indicates a neutral trend, as it falls within the -2% to +2% range. The stock has shown notable volatility, with a standard deviation of 5.2, and has fluctuated between a high of 90.7 and a low of 64.26. The trend analysis indicates acceleration, suggesting that the stock may be gaining momentum despite the minimal overall price change.
Zscaler, Inc. (ZS) ZS has exhibited a much stronger performance, with an impressive price change of +24.12% over the same period. This significant increase clearly indicates a bullish trend. The stock’s volatility is higher, with a standard deviation of 47.23, and it has ranged from a high of 331.14 to a low of 156.78. The acceleration status further supports the bullish outlook, implying that ZS is on an upward trajectory.
In summary, while CTSH presents a stable yet neutral trend, ZS stands out with a strong bullish movement, making it a potentially more attractive option for investors looking for growth.
Analyst Opinions
Recent recommendations indicate a clear divide between two companies. Analysts have rated Cognizant Technology Solutions Corporation (CTSH) with an “A,” suggesting a strong buy position, citing robust return on assets and equity scores. In contrast, Zscaler, Inc. (ZS) has received a “C-” rating, indicating a sell recommendation due to poor performance metrics across multiple categories. The consensus for CTSH leans towards a buy, while ZS is viewed unfavorably. Overall, I would advocate for including CTSH in your portfolio while avoiding ZS for now.
Stock Grades
In the dynamic world of trading and investment, understanding stock grades can provide valuable insights into market sentiment and potential performance. Below are the latest grades for Cognizant Technology Solutions Corporation and Zscaler, Inc.
Cognizant Technology Solutions Corporation Grades
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| William Blair | upgrade | Outperform | 2025-11-21 |
| Wells Fargo | maintain | Overweight | 2025-10-30 |
| JP Morgan | maintain | Overweight | 2025-10-30 |
| UBS | maintain | Neutral | 2025-10-30 |
| RBC Capital | maintain | Sector Perform | 2025-10-30 |
| Guggenheim | maintain | Buy | 2025-10-21 |
| JP Morgan | maintain | Overweight | 2025-08-20 |
| JP Morgan | maintain | Overweight | 2025-07-31 |
| JP Morgan | maintain | Overweight | 2025-07-28 |
| Guggenheim | upgrade | Buy | 2025-07-18 |
Zscaler, Inc. Grades
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Rosenblatt | maintain | Buy | 2025-11-18 |
| Mizuho | maintain | Neutral | 2025-11-17 |
| Morgan Stanley | maintain | Overweight | 2025-11-13 |
| Barclays | maintain | Overweight | 2025-11-12 |
| Wedbush | maintain | Outperform | 2025-11-10 |
| RBC Capital | maintain | Outperform | 2025-10-02 |
| Canaccord Genuity | maintain | Buy | 2025-09-04 |
| JMP Securities | maintain | Market Outperform | 2025-09-03 |
| Evercore ISI Group | maintain | Outperform | 2025-09-03 |
| Needham | maintain | Buy | 2025-09-03 |
Overall, the trend for both companies shows a cautious optimism with multiple firms maintaining or upgrading their grades. Cognizant has seen an upgrade to “Outperform” from William Blair, while Zscaler continues to hold strong ratings across several firms, indicating sustained investor confidence.
Target Prices
The consensus target prices for Cognizant Technology Solutions Corporation (CTSH) and Zscaler, Inc. (ZS) reflect varying expectations among analysts.
| Company | Target High | Target Low | Consensus |
|---|---|---|---|
| Cognizant Technology Solutions Corporation (CTSH) | 85 | 78 | 82.8 |
| Zscaler, Inc. (ZS) | 350 | 300 | 326.13 |
Analysts are generally optimistic about Cognizant, with a consensus of 82.8 compared to its current price of 75.98. Zscaler shows a higher target consensus of 326.13 against its current price of 275.01, indicating a positive outlook as well.
Strengths and Weaknesses
The following table summarizes the strengths and weaknesses of Cognizant Technology Solutions Corporation (CTSH) and Zscaler, Inc. (ZS), based on the most recent data.
| Criterion | Cognizant Technology Solutions (CTSH) | Zscaler, Inc. (ZS) |
|---|---|---|
| Diversification | Strong presence across multiple sectors | Primarily focused on cloud security |
| Profitability | Net profit margin of 11.35% | Currently operating at a loss |
| Innovation | Robust investments in AI and automation | Leading edge in cloud security solutions |
| Global presence | Extensive international operations | Rapidly expanding global footprint |
| Market Share | Significant share in IT services | Growing in the cloud security market |
| Debt level | Low debt-to-equity ratio of 0.10 | Higher debt-to-equity ratio of 1.00 |
Key takeaways: Cognizant shows stronger profitability and lower debt levels, while Zscaler excels in innovation and market growth potential. Investors should weigh these factors carefully when selecting stocks for their portfolios.
Risk Analysis
Below is a summary of the potential risks associated with Cognizant Technology Solutions Corporation (CTSH) and Zscaler, Inc. (ZS).
| Metric | Cognizant Technology Solutions (CTSH) | Zscaler, Inc. (ZS) |
|---|---|---|
| Market Risk | Moderate (Beta: 0.97) | High (Beta: 1.04) |
| Regulatory Risk | Moderate | High |
| Operational Risk | Moderate | High |
| Environmental Risk | Low | Moderate |
| Geopolitical Risk | Moderate | High |
In summary, Zscaler exhibits higher operational and regulatory risks compared to Cognizant, which may impact growth as it faces intense competition in the cloud security market. Both companies should be monitored closely for market fluctuations and regulatory changes.
Which one to choose?
When comparing Cognizant Technology Solutions Corporation (CTSH) and Zscaler, Inc. (ZS), the fundamentals present a clear distinction. CTSH has a market cap of 38.1B, a gross profit margin of 34.3%, and an excellent rating of “A,” reflecting strong operational efficiency. Its price-to-earnings ratio stands at 17.03, making it relatively attractive. In contrast, ZS, with a market cap of 44.1B, shows a gross profit margin of 76.9%, but operates at a net loss and holds a “C-” rating. The stock trend for CTSH appears bullish, with a recent price increase of 5.79%, while ZS has experienced substantial volatility, with a 24.12% increase but high standard deviation.
For growth-oriented investors, CTSH is preferable, while those prioritizing high-margin opportunities might find ZS appealing despite its risks. Key risks for ZS include competition and market dependence due to its high valuation metrics.
Disclaimer: This article is not financial advice. Each investor is responsible for their own investment decisions.
Go further
I encourage you to read the complete analyses of Cognizant Technology Solutions Corporation and Zscaler, Inc. to enhance your investment decisions:
