CGI Inc. (TSE:GIB.A) had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of CA$108 to CA$117. However, is this the true valuation level of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at CGI’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in CGI?
According to my valuation model, CGI seems to be fairly priced at around 11.17% above my intrinsic value, which means if you buy CGI today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth CA$102.21, then there isn’t really any room for the share price grow beyond what it’s currently trading. In addition to this, CGI has a low beta, which suggests its share price is less volatile than the wider market.
What does the future of CGI look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by a double-digit 17% over the next couple of years, the outlook is positive for CGI. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? GIB.A’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on GIB.A, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you'd like to know more about CGI as a business, it's important to be aware of any risks it's facing. For example - CGI has 1 warning sign we think you should be aware of.
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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.
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