Trying to make sense of P/E
Supposedly P/E ratio (especially forward-looking) is the best way to determine valuation for a company.
Perhaps someone can explain to me why CGI is currently at a P/E of 14.5 when the industry average is 19.9?
Based on 2008 projections (admittedly industry analysts' projections) of $0.83 EPS we are currently trading at 12.7.
What is going on? Why is CGI trading at such a discount to industry peers?
One of two things must be true:
1) There are troubles ahead that threaten CGI's ability to meet this year's earnings of $0.80 or higher,
2) The market is undervaluing CGI.
I prefer the latter explanation.
- Serge