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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put CGI Group, Inc. (GIB - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, CGI Group has a trailing twelve months PE ratio of 17.76, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 20.33. If we focus on the stock’s long-term PE trend, the current level puts CGI Group’s current PE ratio above its midpoint over the past five years, with the number having with the number having trended upwards roughly over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Computer – Services sub-industry’s trailing twelve months PE ratio, which stands at 24.33. At the very least, this indicates that the stock is significantly undervalued right now, compared to its peers.
We should also point out that CGI Group has a forward PE ratio (price relative to this year’s earnings) of 16.58, which is tad lower than the current level. So it is fair to say that a slightly more value-oriented path may be ahead for CGI Group stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, CGI Group has a P/S ratio of about 1.24. This is much lower than the S&P 500 average, which comes in at 3.08 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
If anything, GIB is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, CGI Group currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes CGI Group a solid choice for value investors.
What About the Stock Overall?
Though CGI Group might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘B’ and a Momentum score of ‘F’. This gives GIB a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been tad unfavorable at the moment. The current year has seen one estimate go higher in the past sixty days compared to one lower, while the full year estimate has witnessed one down in the same time period.
This has had just a small impact on the consensus estimate though as the current year consensus estimate remained stable in the past two months, while the next year estimate has inched lower by 0.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Despite the unfavorable estimate revision trend the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
CGI Group is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (Bottom 12% of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks Computer – Services industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for broader factors to turn favorable in this name first, but once that happens, this stock could be a compelling pick.
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Is CGI Group a Great Stock for Value Investors?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put CGI Group, Inc. (GIB - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, CGI Group has a trailing twelve months PE ratio of 17.76, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 20.33. If we focus on the stock’s long-term PE trend, the current level puts CGI Group’s current PE ratio above its midpoint over the past five years, with the number having with the number having trended upwards roughly over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Computer – Services sub-industry’s trailing twelve months PE ratio, which stands at 24.33. At the very least, this indicates that the stock is significantly undervalued right now, compared to its peers.
We should also point out that CGI Group has a forward PE ratio (price relative to this year’s earnings) of 16.58, which is tad lower than the current level. So it is fair to say that a slightly more value-oriented path may be ahead for CGI Group stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, CGI Group has a P/S ratio of about 1.24. This is much lower than the S&P 500 average, which comes in at 3.08 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
If anything, GIB is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, CGI Group currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes CGI Group a solid choice for value investors.
What About the Stock Overall?
Though CGI Group might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘B’ and a Momentum score of ‘F’. This gives GIB a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been tad unfavorable at the moment. The current year has seen one estimate go higher in the past sixty days compared to one lower, while the full year estimate has witnessed one down in the same time period.
This has had just a small impact on the consensus estimate though as the current year consensus estimate remained stable in the past two months, while the next year estimate has inched lower by 0.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
CGI Group, Inc. Price and Consensus
CGI Group, Inc. Price and Consensus | CGI Group, Inc. Quote
Despite the unfavorable estimate revision trend the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
CGI Group is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (Bottom 12% of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks Computer – Services industry has clearly underperformed the broader market, as you can see below:
So, value investors might want to wait for broader factors to turn favorable in this name first, but once that happens, this stock could be a compelling pick.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>