Stock Analysis

Is Now An Opportune Moment To Examine CGI Inc. (TSE:GIB.A)?

  •  Updated
TSX:GIB.A
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Today we're going to take a look at the well-established CGI Inc. (TSE:GIB.A). The company's stock saw a double-digit share price rise of over 10% in the past couple of months on the TSX. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine CGI’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for CGI

What is CGI worth?

Good news, investors! CGI is still a bargain right now. My valuation model shows that the intrinsic value for the stock is CA$159.57, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. 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.

What kind of growth will CGI generate?

earnings-and-revenue-growth
TSX:GIB.A Earnings and Revenue Growth May 24th 2021

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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 22% over the next couple of years, the future seems bright 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 undervalued, it may be a great time to increase your holdings in the stock. With an optimistic 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 undervaluation.

Are you a potential investor? If you’ve been keeping an eye on GIB.A for a while, now might be the time to enter the stock. Its buoyant future 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 investment decision.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of CGI.

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

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