Stock Analysis

Is It Too Late To Consider Buying CGI Inc. (TSE:GIB.A)?

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TSX:GIB.A
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CGI Inc. (TSE:GIB.A) received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$113 at one point, and dropping to the lows of CA$100. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether CGI's current trading price of CA$100 reflective of the actual value 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.

Check out our latest analysis for CGI

What's the opportunity in CGI?

Good news, investors! CGI is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that CGI’s ratio of 17.38x is below its peer average of 34.49x, which indicates the stock is trading at a lower price compared to the IT industry. However, given that CGI’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from CGI?

earnings-and-revenue-growth
TSX:GIB.A Earnings and Revenue Growth March 28th 2022

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 12% 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? Since GIB.A is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on GIB.A for a while, now might be the time to make a leap. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy GIB.A. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.

If you want to dive deeper into CGI, you'd also look into what risks it is currently facing. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of CGI.

If you are no longer interested in CGI, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Valuation is complex, but we're helping make it simple.

Find out whether CGI is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About TSX:GIB.A

CGI

CGI Inc., together with its subsidiaries, provides information technology (IT) and business process services in Canada; Western, Southern, Central, and Eastern Europe; Australia; Scandinavia; Finland, Poland, and Baltics; the United States; the United Kingdom; and the Asia Pacific.

Solid track record with excellent balance sheet.