Identifying Comparables and Estimating Equity Value Using PE

Assume that your superior requests that you estimate the equity intrinsic value of

CGI Group Inc. using

PE ratios for comparable companiesCGI Group is one of the worlds largest information technology

and business process services companies. The following online data are available from various companies.

Ticker

Market Cap

($ mil.)

Forward

PE

EPS 5-Year Historical

Growth Rate

ROE

(T 4Q)

Debt-to-Equity

(Prior Q)

GIB . . . . . . . . . . . . . 20.65% 15.99% 0.73

EQIX. . . . . . . . . . . . $9,380 33.30 7.72% 3.84% 1.61

JCOM. . . . . . . . . . . 2,310 13.31 11.60% 16.53% 0.35

XXIA . . . . . . . . . . . . 933 13.03 60.34% 4.68% 0.40

QNST . . . . . . . . . . . 294 14.40 (15.91)% (18.89)% 0.36

VOCS . . . . . . . . . . . 269 33.09 (24.05)% (12.57)% 0.01

NTES . . . . . . . . . . . 8,650 9.86 26.59% 24.86% 0.05

ULTI . . . . . . . . . . . . 4,740 67.40 47.25% 16.86% 0.04

DMD. . . . . . . . . . . . 498 26.43 9.50% (0.81)% 0.10

DRIV. . . . . . . . . . . . 554 29.06 (17.73)% (4.44)% 0.75

Required

a. Identify the set of companies you plan to use as comparables. (Hint: Consider each company on the

basis of profitability, growth, and financial risk.)

b. Estimate the equity intrinsic value of CGI Group. Its earnings estimate is $867 million.

c. Prepare a memorandum to your superior identifying any issues that you believe should be consid-

ered before using the equity intrinsic value from part b for business decisions

P15-36. Identifying Comparables and Estimating Equity Value Using PE Assume that your superior requests that you estimate the equity intrinsic value of CGI Group Inc. using PE ratios for comparable companies-CGI Group is one of the world's largest information technology and business process services companies. The following online data are available from various companies. Market Cap Forward EPS 5-Year Historical ($ mil.) PE Growth Rate ROE (T 4Q) Debt-to-Equity (Prior Q) Ticker GIB. EQIX. JCOM. XXIA. QNST. VOCS. NTES ULTI DMD. DRIV. $9,380 2,310 933 294 269 8,650 4,740 498 554 33.30 13.31 13.03 14.40 33.09 9.86 67.40 26.43 29.06 20.65% 7.72% 11.60% 60.34% (15.91)% (24.05) % 26.59% 47.25% 9.50% (17.73)% 15.99% 3.84% 16.53% 4.68% (18.89)% (12.57)% 24.86% 16.86% (0.81)% (4.44)% 0.73 1.61 0.35 0.40 0.36 0.01 0.05 0.04 0.10 0.75 Required a. Identify the set of companies you plan to use as comparables. (Hint: Consider each company on the basis of profitability, growth, and financial risk.) b. Estimate the equity intrinsic value of CGI Group. Its earnings estimate is $867 million. Prepare a memorandum to your superior identifying any issues that you believe should be consid- ered before using the equity intrinsic value from part b for business decisions. c. P15-36. Identifying Comparables and Estimating Equity Value Using PE Assume that your superior requests that you estimate the equity intrinsic value of CGI Group Inc. using PE ratios for comparable companies-CGI Group is one of the world's largest information technology and business process services companies. The following online data are available from various companies. Market Cap Forward EPS 5-Year Historical ($ mil.) PE Growth Rate ROE (T 4Q) Debt-to-Equity (Prior Q) Ticker GIB. EQIX. JCOM. XXIA. QNST. VOCS. NTES ULTI DMD. DRIV. $9,380 2,310 933 294 269 8,650 4,740 498 554 33.30 13.31 13.03 14.40 33.09 9.86 67.40 26.43 29.06 20.65% 7.72% 11.60% 60.34% (15.91)% (24.05) % 26.59% 47.25% 9.50% (17.73)% 15.99% 3.84% 16.53% 4.68% (18.89)% (12.57)% 24.86% 16.86% (0.81)% (4.44)% 0.73 1.61 0.35 0.40 0.36 0.01 0.05 0.04 0.10 0.75 Required a. Identify the set of companies you plan to use as comparables. (Hint: Consider each company on the basis of profitability, growth, and financial risk.) b. Estimate the equity intrinsic value of CGI Group. Its earnings estimate is $867 million. Prepare a memorandum to your superior identifying any issues that you believe should be consid- ered before using the equity intrinsic value from part b for business decisions. c