CGI Inc. (GIB.A) Fair Value Analysis (2026)

Executive Summary

As of November 18, 2025, with a closing price of $121.76, CGI Inc. appears to be undervalued. This conclusion is based on its strong free cash flow generation, reasonable earnings multiples compared to its history and peers, and a healthy shareholder return policy. Key metrics include a robust FCF Yield of 8.06%, a P/E ratio of 16.47 that is below its historical average, and a consistent share buyback program. With the stock trading in the lower third of its 52-week range, the takeaway is positive, suggesting the market may not fully appreciate CGI's solid financial health.

Comprehensive Analysis

As of November 18, 2025, CGI Inc. (GIB.A) presents a compelling case for being undervalued. A triangulated valuation approach, combining multiples, cash flow, and shareholder returns, points towards a fair value range that is comfortably above its current trading price of $121.76. This suggests the stock is undervalued with a significant margin of safety, making it an attractive entry point for long-term investors.

CGI's TTM P/E ratio stands at 16.47, which is below its 10-year historical average of 19.32, suggesting the stock is cheaper than it has been historically. Similarly, the TTM EV/EBITDA ratio of 10.02 is below its 10-year median of 12.41 and compares favorably to the IT services industry median of 11.4x to 13.0x. Applying a conservative P/E multiple of 18x (still below its historical average) to its TTM EPS of $7.35 would imply a share price of approximately $132.30, reinforcing the undervalued thesis.

For a mature IT services firm like CGI, free cash flow (FCF) is a critical valuation metric. With a TTM FCF of $2,118 million, the company generates a strong FCF yield of 8.06%, a very healthy return for a company of its size and stability. Valuing the company based on a required yield of 6% on its TTM FCF per share of $9.39 would imply a value of $156.50 per share, which further strengthens the argument that the stock is currently undervalued.

Combining these methods, a fair value range of $145 - $165 per share seems appropriate. The multiples approach provides a conservative lower bound, while the cash-flow approach highlights the intrinsic value being generated by the business. The most weight is given to the cash-flow-based valuation, as free cash flow is a direct measure of the cash available to be returned to shareholders and is less susceptible to accounting variations than earnings.

Factor Analysis

Shareholder Yield & Policy

Pass

CGI has a shareholder-friendly capital return policy, consistently returning cash to investors through a significant buyback program and a modest but growing dividend.

CGI demonstrates a strong commitment to returning capital to shareholders. While the dividend yield is modest at 0.56%, the dividend payout ratio is very low at 8.14%, indicating that there is significant room for future dividend growth. More importantly, the company has an active share buyback program, with a buyback yield of 2.67%. This net share issuance reduction is a tax-efficient way to return capital to shareholders and increase earnings per share. The combination of dividends and buybacks provides a solid total shareholder yield. This consistent return of capital is a positive signal of the management's confidence in the company's future cash flows and its commitment to creating shareholder value.

Cash Flow Yield

Pass

CGI's strong free cash flow generation, leading to a high FCF yield, signals that the company is trading at an attractive valuation relative to the cash it produces.

CGI demonstrates robust cash flow generation, a key indicator of financial health for an IT services company. With a trailing twelve months (TTM) operating cash flow that comfortably exceeds capital expenditures, the company produces significant free cash flow (FCF). The TTM FCF Yield is a compelling 8.06%, which is very attractive in the current market environment. This high yield suggests that investors are getting a strong return in the form of cash generation for the price they are paying for the stock. The company's FCF margin of 13.31% for the latest fiscal year further underscores its efficiency in converting revenue into cash. The EV/FCF ratio of 14.1 is also reasonable, indicating that the market is not overvaluing the company's cash-generating capabilities. This strong and consistent cash flow provides CGI with the flexibility to invest in growth, pay down debt, and return capital to shareholders.

Earnings Multiple Check

Pass

The company's P/E ratio is currently below its historical average and appears reasonable when compared to the broader IT services sector, suggesting a favorable valuation based on earnings.

CGI's trailing twelve-month (TTM) P/E ratio of 16.47 is below its 10-year historical average of approximately 19.32. This indicates that the stock is currently trading at a discount to its own historical valuation. The forward P/E of 13.48 suggests that earnings are expected to grow. While a direct peer comparison for P/E can be challenging due to differences in growth profiles and accounting practices, CGI's multiple appears conservative for a company with its market position and consistent profitability. The sector median P/E for IT services can be higher, with some sources indicating an average in the mid-to-high teens or even low twenties, depending on the specific sub-sector and growth expectations.

EV/EBITDA Sanity Check

Pass

CGI's EV/EBITDA ratio is below its historical median and in line with or slightly below the industry average, indicating that the company is not overvalued from an enterprise value perspective.

The Enterprise Value to EBITDA (EV/EBITDA) ratio is a crucial metric for service-based companies as it normalizes for differences in capital structure and tax rates. CGI's TTM EV/EBITDA of 10.02 is below its 10-year median of 12.41. This suggests that on an enterprise basis, the company is valued less expensively than it has been in the past. The sector median for IT consulting has been in the range of 11.4x to 13.0x, placing CGI at the lower end of this range. With a healthy EBITDA margin of 17.86%, this valuation appears attractive. A lower EV/EBITDA multiple compared to peers can suggest undervaluation, especially when the company's profitability is strong and stable.

Growth-Adjusted Valuation

Pass

While the PEG ratio is slightly above 1, the company's consistent, albeit moderate, earnings growth and reasonable P/E ratio suggest that the current valuation is not excessively stretched relative to its growth prospects.

The PEG ratio, which compares the P/E ratio to the earnings growth rate, provides a more dynamic view of valuation. With a TTM P/E of 16.47 and recent annual EPS growth being modest, the PEG ratio of 1.42 is slightly above the traditional "undervalued" threshold of 1. However, for a mature and stable company like CGI, a PEG ratio in this range can still be considered reasonable. The EPS growth for the next fiscal year is expected to be positive, and the forward P/E is lower at 13.48, which points to a more attractive forward-looking PEG. The company has a consistent track record of delivering earnings, and its long-term growth strategy, which includes a mix of organic growth and strategic acquisitions, should support continued earnings expansion.