CGI (TSE:GIB.A) sheds 5.7% this week, as yearly returns fall more in line with earnings growth

While CGI Inc. (TSE:GIB.A) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 14% in the last quarter. But at least the stock is up over the last five years. Unfortunately its return of 35% is below the market return of 63%.

While the stock has fallen 5.7% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

See our latest analysis for CGI

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Over half a decade, CGI managed to grow its earnings per share at 11% a year. The EPS growth is more impressive than the yearly share price gain of 6% over the same period. So it seems the market isn't so enthusiastic about the stock these days.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that CGI has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

A Different Perspective

CGI shareholders are down 4.2% for the year, but the market itself is up 16%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 6%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Before spending more time on CGI it might be wise to click here to see if insiders have been buying or selling shares.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Canadian exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.