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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/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?

1. 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.
2. Canadian Listing:
   Being listed in Toronto might limit its visibility among U.S. and global investors despite its international operations.
3. 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) 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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