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Cognizant Technology Solutions earnings quality score

How much of the reported profit is backed by cash, and how many markers of managed earnings the filings show

Score65 / 100 · grade B · rank 535 of 1027

Cognizant Technology Solutions (CTSH) scores 65 of 100 for earnings quality, grade B: rank 535 of 1027 companies and 123 of 203 in technology. It loses the most points on accruals of -3.2% of assets, higher than 60% of companies (profit backed by cash), Montier C-score 2 of 5 checks failed, profit far steadier than cash flow (smoothness 0.27). It earns full or near-full marks for Dechow F-score 0.61 (normal).

What earned and lost points

ComponentWhat the filings showPointsOf
Accrualsaccruals of -3.2% of assets, higher than 60% of companies (profit backed by cash)1027
Dechow F-scoreDechow F-score 0.61 (normal)2020
Montier C-scoreMontier C-score 2 of 5 checks failed1220
Discretionary accrualsdiscretionary accruals of +1.0% of assets (modified Jones), smaller than most1113
Non-GAAP gapadjusted earnings 6% below GAAP1113
Earnings smoothnessprofit far steadier than cash flow (smoothness 0.27)17
CTSH: share of the available points, by componentCTSH: share of the available points, by componentAccruals39%Discretionary accruals83%Dechow F-score100%Montier C-score60%Non-GAAP gap80%Earnings smoothness13%

How the score is built

Eight published measures, each scored against the whole universe or on its own scale and weighted: accruals 20, discretionary accruals 10, Beneish M 15, Dechow F 15, Montier C 15, Piotroski F 10, the non-GAAP gap 10, smoothness 5. A measure that cannot be computed (Beneish for a bank, say) drops out and the rest is rescaled, so every company is scored on what applies to it.

Every company ranked → The full quality workbench, live → Cognizant Technology Solutions: cash flow →

Computed from the companies’ own XBRL filings (latest fiscal year) by published formulas; a statistical screen, not an audit or an accusation. A low score means the reported profit shows more of the markers of managed or low-quality earnings than its peers. Not investment advice.