Cognizant Technology Solutions Corp. (CTSH) surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average positive earnings surprise of 3.4%.

With long-term earnings per share growth rate of 12.6% and a market cap of $46.8 billion, it seems to be a stock that should maintain a place in investors’ portfolio.

Let’s take a detailed look at the factors that are impacting the company’s performance.

Significant exposure to the fast-growing verticals like financial services and healthcare has boosted Cognizant’s growth. The company is consistently developing its capabilities for the integration of the new digital framework with legacy technology platforms.

Additionally, transactions such as the TriZetto buyout and more recently, the acquisitions of Bolder Healthcare and Mirabeau are likely to benefit the company. Apart from gaining new customers from these buyouts, the company expanded its capabilities in the healthcare industry and improved overall digital delivery abilities.

Cognizant is expected to continue benefiting from solid demand for high quality, lower cost technology services. Based on its global delivery model and capacity expansion in low cost areas in India, China, Philippines and Latin America, the company remains well-positioned in the outsourcing market.

Cognizant Technology Solutions Corporation Revenue (TTM)

Cognizant Technology Solutions Corporation Revenue (TTM) | Cognizant Technology Solutions Corporation Quote

However, the company faces significant geographic concentration risks, with North America’s significant contribution to its revenues. Cognizant also earns nearly 40% of its revenues from the financial services industry. Therefore, any slowdown in the region’s economic environment or consolidation in the financial services industry is anticipated to have a negative impact on the company.

Cognizant too faces stiff competition from the likes of Infosys Technologies (INFY - Free Report) , Accenture (ACN - Free Report) , Tata Consultancy Services and Wipro among others, which is an added concern.

Furthermore, the company relates to the nature of its business, which necessitates bringing employees into the United States for on-site application maintenance work. With continuous pressure to avoid outsourcing and employment of foreign nationals, the U.S. government under President Donald Trump is mulling to reduce the number of H1-B visas granted each year. This, in turn, might negatively impact Cognizant’s performance.

Nevertheless, the company’s foray into growth-oriented markets, strong domain expertise and ability to keep up with ongoing digital transformation justify the retention of this Zacks Rank #3 (Hold) stock in investors’ portfolio.

Another Key Pick

A better-ranked stock in the broader technology sector is NVIDIA (NVDA - Free Report) sporting a Zacks Rank #1 (Strong Buy). The long-term earnings growth rate for NVIDIA is projected to be 10.3%.