As part of our ongoing series here at The Acquirer’s Multiple, each week we focus on one of the stocks from our Stock Screeners, and why it might be a deeply undervalued gem.
The stock this week is from our Canada All TSX Stocks Screener:
CGI Inc (GIB.A.TO)
CGI Inc is a global IT and business consulting services firm based in Canada. It operates across more than 40 countries and serves clients in key sectors including government, banking, healthcare, and manufacturing. With a strong focus on recurring revenue and long-term client contracts, CGI has built a resilient and scalable business model that thrives across market cycles.
One of the metrics we use in our screens is IV/P (Intrinsic Value to Price). Let’s break it down:
What is IV/P (Intrinsic Value to Price)?
IV/P helps determine whether you’re getting a good deal on a stock based on its fundamental value.
The Calculation:
It estimates the business’s intrinsic value by weighing its earnings power, growth prospects, and shareholder returns (dividends and buybacks).
The Interpretation:
- IV/P > 1: Stock may be undervalued.
- IV/P < 1: Stock may be overvalued.
- The higher the IV/P, the greater the implied discount to true value.
IV/P for CGI Inc: 2.20
CGI currently trades at an IV/P of 2.20, meaning the company’s intrinsic value is more than twice its current share price.
In plain terms:
For every $1 you spend, you’re potentially getting $2.20 of value.
That’s a strong value proposition and signals a possible margin of safety.
Supporting Metrics:
- Dividend Yield: 5.83%
A generous yield, particularly for a tech-oriented firm, showing solid capital return. - Free Cash Flow Yield: 7.57%
Indicates strong cash generation, giving CGI flexibility for reinvestment, dividends, and acquisitions.
Why Might CGI Be Undervalued?
- Low-Profile vs. Big Tech:
CGI doesn’t get the same hype as Silicon Valley giants, even though its returns and margins are consistently strong. - Canadian Listing:
Being listed in Toronto might limit its visibility among U.S. and global investors despite its international operations. - Long-Term Contracts = Less Excitement:
CGI focuses on steady, recurring revenue from government and enterprise contracts — great for stability, less exciting for growth-chasers.
Conclusion:
With an IV/P of 2.20, CGI Inc (GIB.A.TO) appears attractively priced for long-term investors. Its combination of strong free cash flow, above-average dividend yield, and reliable earnings make it a quiet compounder in the IT space. For value investors looking for safety with upside, CGI is worth a closer look.
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7 Comments on “CGI Inc (GIB.A.TO): Is This Deeply Undervalued Stock a Hidden Gem?”
How do you calculate the dividend yield to arrive at 5,83%?
Looks like you’ve put the dividend payout ratio as the dividend yield…
The shares are dual listed in Toronto and New York. PE ratio is about 19, same as it has been for many years. The Morningstar analyst has fair value about 12% above the current price. Not sure why it would be worth double.
And the yield is less than 1%
I think 5.83 is the FCF yield of CGI
Interesting company; and one I was not aware of. Thanks for the write up. I have the same question as JF…unsure of how to get to the dividend yield value. It would be great if you could explain.
Non-sense article. PE of 20 has been standard for a modest growing tech services firm. Forget the hype, this company doesn’t have anywhere close to a big tech business model, more into enterprise outsourcing. In fact, the declining growth rates and AI impact call for more caution than being bullish.