RE: No rhyme or reason to the ramblingShinny1,
I did indeed make a mistake. I said EPS of 11.5, but I meant to say P/E of 11.5.
You like numbers? How about these numbers:
Without the impact of the weak USD we could expect to see EPS of $0.20 for Q4, giving us something around the realm of $0.80 for the year. Which in turn means that we're trading at a Price to Earnings ratio of about 11.5. We should be at least 15 or 17 based on the industry averages, meaning that we should theoretically be at $12 or higher.
It's not rocket science, nor is it number fudging. It's simple math, and the most reliable measuring stick there is (if there is one) to compare stocks within an industry.
You sound like an intelligent individual, so I'm sure you agree with this.
However, let's consider the impact of the weak USD. Suppose that about 30% of CGI's revenue is in USD. I'm assuming that the margins on providing these services hasn't changed too much since most of the work is done in the US with US staff, salaries and associated costs. Therefore, you can expect the US business to contribute about 30% of the EPS, but that 30% is now down by about 20% year-over-year based on the currency exchange.
Assuming the above, on a quarterly basis about $0.07 per share is attributed to US earnings. Take away about 20% of that and the contribution goes down to $0.05 (rounding down).
This means that instead of hitting $0.20 as per the original estimates on the streeet, we now are at $0.18.
I'm proposing $0.16 in a worst case scenario, but I honestly believe it will be better than that.
The demand for IT services remains strong (ask anyone in the business). Based solely on industry statistics, one could reasonable expect that CGI would have added incremental work of at least 10% based solely on additional work for existing clients. That's not counting new business.
The Q4 numbers on Wednesday next week should be solid. There's no reason to believe otherwise.
When these numbers are released we should we an immediate surge in the SP then continued gains in the following months.
I expect that we'll be back in the $11 - $12 range before the end of the year, with further gains early in the new year.
I post this comment every year .... CGI always gains upward momentum late in the calendar year and early in the new year. Most years the gains are around 20%... this year should arguably be more.
- Surge