Intrinsic value of CGI Inc. - GIB

Previous Close

$78.75

  Intrinsic Value

$67.86

stock screener

  Rating & Target

hold

-14%

Previous close

$78.75

 
Intrinsic value

$67.86

 
Up/down potential

-14%

 
Rating

hold

We calculate the intrinsic value of GIB stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 19.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  8,891
  9,096
  9,330
  9,592
  9,883
  10,202
  10,549
  10,925
  11,331
  11,765
  12,231
  12,727
  13,256
  13,817
  14,413
  15,045
  15,714
  16,421
  17,168
  17,957
  18,789
  19,667
  20,592
  21,567
  22,593
  23,674
  24,812
  26,010
  27,269
  28,594
Variable operating expenses, $m
  7,661
  7,824
  8,010
  8,218
  8,450
  8,703
  8,980
  9,279
  9,601
  9,946
  9,724
  10,118
  10,539
  10,985
  11,459
  11,961
  12,493
  13,055
  13,649
  14,276
  14,938
  15,636
  16,371
  17,146
  17,962
  18,822
  19,727
  20,678
  21,680
  22,733
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  7,661
  7,824
  8,010
  8,218
  8,450
  8,703
  8,980
  9,279
  9,601
  9,946
  9,724
  10,118
  10,539
  10,985
  11,459
  11,961
  12,493
  13,055
  13,649
  14,276
  14,938
  15,636
  16,371
  17,146
  17,962
  18,822
  19,727
  20,678
  21,680
  22,733
Operating income, $m
  1,230
  1,272
  1,320
  1,374
  1,433
  1,499
  1,570
  1,647
  1,730
  1,819
  2,507
  2,609
  2,717
  2,832
  2,954
  3,084
  3,221
  3,366
  3,519
  3,681
  3,851
  4,031
  4,221
  4,421
  4,631
  4,853
  5,086
  5,331
  5,589
  5,861
EBITDA, $m
  1,982
  2,027
  2,079
  2,138
  2,203
  2,274
  2,351
  2,435
  2,525
  2,622
  2,726
  2,837
  2,954
  3,080
  3,213
  3,353
  3,502
  3,660
  3,826
  4,002
  4,188
  4,383
  4,590
  4,807
  5,036
  5,277
  5,530
  5,797
  6,078
  6,373
Interest expense (income), $m
  58
  74
  78
  83
  89
  95
  102
  110
  119
  128
  138
  149
  160
  172
  185
  199
  214
  229
  246
  263
  281
  301
  321
  343
  365
  389
  415
  441
  469
  498
  529
Earnings before tax, $m
  1,156
  1,194
  1,237
  1,285
  1,338
  1,396
  1,460
  1,528
  1,602
  1,681
  2,358
  2,449
  2,545
  2,647
  2,755
  2,870
  2,992
  3,120
  3,256
  3,399
  3,551
  3,710
  3,878
  4,055
  4,242
  4,438
  4,645
  4,862
  5,091
  5,332
Tax expense, $m
  312
  322
  334
  347
  361
  377
  394
  413
  433
  454
  637
  661
  687
  715
  744
  775
  808
  842
  879
  918
  959
  1,002
  1,047
  1,095
  1,145
  1,198
  1,254
  1,313
  1,375
  1,440
Net income, $m
  844
  872
  903
  938
  977
  1,019
  1,066
  1,116
  1,169
  1,227
  1,722
  1,788
  1,858
  1,932
  2,011
  2,095
  2,184
  2,278
  2,377
  2,481
  2,592
  2,708
  2,831
  2,960
  3,096
  3,240
  3,391
  3,549
  3,716
  3,892

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  9,214
  9,426
  9,668
  9,940
  10,241
  10,572
  10,932
  11,322
  11,742
  12,192
  12,674
  13,189
  13,736
  14,318
  14,936
  15,591
  16,284
  17,016
  17,790
  18,608
  19,470
  20,380
  21,339
  22,349
  23,413
  24,533
  25,712
  26,953
  28,258
  29,631
Adjusted assets (=assets-cash), $m
  9,214
  9,426
  9,668
  9,940
  10,241
  10,572
  10,932
  11,322
  11,742
  12,192
  12,674
  13,189
  13,736
  14,318
  14,936
  15,591
  16,284
  17,016
  17,790
  18,608
  19,470
  20,380
  21,339
  22,349
  23,413
  24,533
  25,712
  26,953
  28,258
  29,631
Revenue / Adjusted assets
  0.965
  0.965
  0.965
  0.965
  0.965
  0.965
  0.965
  0.965
  0.965
  0.965
  0.965
  0.965
  0.965
  0.965
  0.965
  0.965
  0.965
  0.965
  0.965
  0.965
  0.965
  0.965
  0.965
  0.965
  0.965
  0.965
  0.965
  0.965
  0.965
  0.965
Average production assets, $m
  3,361
  3,438
  3,527
  3,626
  3,736
  3,856
  3,988
  4,130
  4,283
  4,447
  4,623
  4,811
  5,011
  5,223
  5,448
  5,687
  5,940
  6,207
  6,489
  6,788
  7,102
  7,434
  7,784
  8,152
  8,540
  8,949
  9,379
  9,832
  10,308
  10,809
Working capital, $m
  116
  118
  121
  125
  128
  133
  137
  142
  147
  153
  159
  165
  172
  180
  187
  196
  204
  213
  223
  233
  244
  256
  268
  280
  294
  308
  323
  338
  355
  372
Total debt, $m
  1,444
  1,537
  1,643
  1,763
  1,895
  2,040
  2,198
  2,369
  2,554
  2,751
  2,963
  3,189
  3,429
  3,685
  3,956
  4,243
  4,547
  4,869
  5,209
  5,568
  5,946
  6,346
  6,767
  7,210
  7,677
  8,169
  8,687
  9,231
  9,804
  10,407
Total liabilities, $m
  4,045
  4,138
  4,244
  4,364
  4,496
  4,641
  4,799
  4,970
  5,155
  5,352
  5,564
  5,790
  6,030
  6,286
  6,557
  6,844
  7,148
  7,470
  7,810
  8,169
  8,547
  8,947
  9,368
  9,811
  10,278
  10,770
  11,288
  11,832
  12,405
  13,008
Total equity, $m
  5,169
  5,288
  5,424
  5,576
  5,745
  5,931
  6,133
  6,351
  6,587
  6,840
  7,110
  7,399
  7,706
  8,033
  8,379
  8,746
  9,135
  9,546
  9,980
  10,439
  10,923
  11,433
  11,971
  12,538
  13,135
  13,763
  14,425
  15,121
  15,853
  16,623
Total liabilities and equity, $m
  9,214
  9,426
  9,668
  9,940
  10,241
  10,572
  10,932
  11,321
  11,742
  12,192
  12,674
  13,189
  13,736
  14,319
  14,936
  15,590
  16,283
  17,016
  17,790
  18,608
  19,470
  20,380
  21,339
  22,349
  23,413
  24,533
  25,713
  26,953
  28,258
  29,631
Debt-to-equity ratio
  0.280
  0.290
  0.300
  0.320
  0.330
  0.340
  0.360
  0.370
  0.390
  0.400
  0.420
  0.430
  0.450
  0.460
  0.470
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.560
  0.570
  0.580
  0.580
  0.590
  0.600
  0.610
  0.620
  0.630
Adjusted equity ratio
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561
  0.561

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  844
  872
  903
  938
  977
  1,019
  1,066
  1,116
  1,169
  1,227
  1,722
  1,788
  1,858
  1,932
  2,011
  2,095
  2,184
  2,278
  2,377
  2,481
  2,592
  2,708
  2,831
  2,960
  3,096
  3,240
  3,391
  3,549
  3,716
  3,892
Depreciation, amort., depletion, $m
  752
  755
  760
  764
  770
  775
  781
  788
  795
  803
  219
  228
  237
  248
  258
  270
  282
  294
  308
  322
  337
  352
  369
  386
  405
  424
  445
  466
  489
  512
Funds from operations, $m
  1,596
  1,627
  1,663
  1,702
  1,746
  1,795
  1,847
  1,904
  1,965
  2,031
  1,941
  2,016
  2,095
  2,180
  2,270
  2,365
  2,465
  2,572
  2,684
  2,803
  2,928
  3,061
  3,200
  3,347
  3,501
  3,664
  3,835
  4,015
  4,205
  4,404
Change in working capital, $m
  2
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
Cash from operations, $m
  1,594
  1,624
  1,659
  1,699
  1,743
  1,790
  1,843
  1,899
  1,960
  2,025
  1,935
  2,009
  2,088
  2,173
  2,262
  2,357
  2,457
  2,563
  2,675
  2,793
  2,918
  3,049
  3,188
  3,334
  3,488
  3,650
  3,820
  4,000
  4,189
  4,387
Maintenance CAPEX, $m
  -156
  -159
  -163
  -167
  -172
  -177
  -183
  -189
  -196
  -203
  -211
  -219
  -228
  -237
  -248
  -258
  -270
  -282
  -294
  -308
  -322
  -337
  -352
  -369
  -386
  -405
  -424
  -445
  -466
  -489
New CAPEX, $m
  -63
  -77
  -88
  -99
  -110
  -121
  -131
  -142
  -153
  -164
  -176
  -188
  -200
  -212
  -225
  -239
  -253
  -267
  -282
  -298
  -315
  -332
  -350
  -368
  -388
  -409
  -430
  -453
  -476
  -501
Cash from investing activities, $m
  -219
  -236
  -251
  -266
  -282
  -298
  -314
  -331
  -349
  -367
  -387
  -407
  -428
  -449
  -473
  -497
  -523
  -549
  -576
  -606
  -637
  -669
  -702
  -737
  -774
  -814
  -854
  -898
  -942
  -990
Free cash flow, $m
  1,375
  1,388
  1,408
  1,433
  1,461
  1,493
  1,528
  1,568
  1,611
  1,658
  1,548
  1,602
  1,661
  1,723
  1,789
  1,860
  1,934
  2,014
  2,098
  2,187
  2,281
  2,381
  2,486
  2,597
  2,713
  2,836
  2,966
  3,103
  3,246
  3,398
Issuance/(repayment) of debt, $m
  80
  93
  106
  119
  132
  145
  158
  171
  184
  198
  212
  226
  240
  256
  271
  287
  304
  322
  340
  359
  379
  399
  421
  443
  467
  492
  518
  545
  573
  603
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  80
  93
  106
  119
  132
  145
  158
  171
  184
  198
  212
  226
  240
  256
  271
  287
  304
  322
  340
  359
  379
  399
  421
  443
  467
  492
  518
  545
  573
  603
Total cash flow (excl. dividends), $m
  1,454
  1,481
  1,514
  1,552
  1,593
  1,638
  1,686
  1,739
  1,795
  1,855
  1,760
  1,828
  1,901
  1,978
  2,060
  2,147
  2,239
  2,336
  2,438
  2,546
  2,660
  2,780
  2,907
  3,040
  3,180
  3,328
  3,484
  3,647
  3,819
  4,000
Retained Cash Flow (-), $m
  -105
  -119
  -136
  -153
  -169
  -185
  -202
  -219
  -236
  -253
  -270
  -289
  -307
  -327
  -347
  -367
  -389
  -411
  -434
  -459
  -484
  -510
  -538
  -567
  -597
  -628
  -661
  -696
  -732
  -770
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  1,350
  1,362
  1,379
  1,399
  1,424
  1,452
  1,484
  1,520
  1,560
  1,603
  1,489
  1,540
  1,594
  1,652
  1,714
  1,780
  1,850
  1,925
  2,004
  2,087
  2,176
  2,270
  2,369
  2,473
  2,584
  2,700
  2,822
  2,951
  3,087
  3,230
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  1,294
  1,247
  1,200
  1,152
  1,104
  1,054
  1,003
  950
  896
  840
  707
  657
  606
  555
  503
  452
  403
  354
  309
  265
  225
  188
  155
  126
  101
  79
  61
  46
  34
  24
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

CGI Group Inc. (CGI), directly or through its subsidiaries, manages information technology (IT) services, as well as business process services (BPS). The Company's services include the management of IT and business functions (outsourcing), systems integration and consulting, as well as the sale of software solutions. The Company's segments are United States of America (U.S.); Nordics; Canada; France (including Luxembourg and Morocco) (France); United Kingdom (U.K.); Eastern, Central and Southern Europe (primarily the Netherlands and Germany) (ECS); and Asia Pacific (including Australia, India and the Philippines) (Asia Pacific). Its services in an end-to-end engagement include application development, integration and maintenance; technology infrastructure management; and business process services, such as collections and payroll management. Its Internet Protocol (IP)-based business solutions include CGI Advantage, Momentum, Credit Services Solutions, CGI Atlas360 and CGI Trade360.

FINANCIAL RATIOS  of  CGI Inc. (GIB)

Valuation Ratios
P/E Ratio 29.5
Price to Sales 2.8
Price to Book 4.9
Price to Tangible Book
Price to Cash Flow 22.5
Price to Free Cash Flow 29.2
Growth Rates
Sales Growth Rate 1.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -15%
Cap. Spend. - 3 Yr. Gr. Rate 3.9%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 28%
Total Debt to Equity 30%
Interest Coverage 19
Management Effectiveness
Return On Assets 9.5%
Ret/ On Assets - 3 Yr. Avg. 9.4%
Return On Total Capital 12.6%
Ret/ On T. Cap. - 3 Yr. Avg. 12.6%
Return On Equity 16.3%
Return On Equity - 3 Yr. Avg. 17%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 30%
Gross Margin - 3 Yr. Avg. 30.2%
EBITDA Margin 17.3%
EBITDA Margin - 3 Yr. Avg. 17.8%
Operating Margin 13.1%
Oper. Margin - 3 Yr. Avg. 13.2%
Pre-Tax Margin 13.1%
Pre-Tax Margin - 3 Yr. Avg. 13.2%
Net Profit Margin 9.5%
Net Profit Margin - 3 Yr. Avg. 9.7%
Effective Tax Rate 27%
Eff/ Tax Rate - 3 Yr. Avg. 26.6%
Payout Ratio 0%

GIB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GIB stock intrinsic value calculation we used $8717 million for the last fiscal year's total revenue generated by CGI Inc.. The default revenue input number comes from 0001 income statement of CGI Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our GIB stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for GIB is calculated based on our internal credit rating of CGI Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of CGI Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of GIB stock the variable cost ratio is equal to 86.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for GIB stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for CGI Inc..

Corporate tax rate of 27% is the nominal tax rate for CGI Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the GIB stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for GIB are equal to 37.8%.

Life of production assets of 21.1 years is the average useful life of capital assets used in CGI Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for GIB is equal to 1.3%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $5064.24772727 million for CGI Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 245.185 million for CGI Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of CGI Inc. at the current share price and the inputted number of shares is $19.3 billion.

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