CGI Group Inc. (TSX:GIB.A)(NYSE:GIB), the world’s fifth-largest independent information technology and business process services firm, released its third-quarter earnings results this morning, and its stock has responded by falling over 3%. Let’s take a closer look at the results and the fundamentals of its stock to determine if we should consider using this weakness as a long-term buying opportunity or wait for an even better entry point in the days ahead.
The results that failed to impress
Here’s a breakdown of 10 of the most notable statistics from CGI’s three-month period ended on June 30, 2017, compared with the same period in 2016:
| Metric | Q3 2017 | Q3 2016 | Change |
| Revenue | $2.84 billion | $2.67 billion | 6.4% |
| Adjusted EBIT | $399.1 million | $390.5 million | 2.2% |
| Adjusted EBIT margin | 14.1% | 14.6% | (50 basis points) |
| Net earnings excluding specific items | $278.5 million | $273.8 million | 1.7% |
| Diluted earnings per share (EPS) excluding specific items | $0.93 | $0.89 | 4.5% |
| Cash provided by operating activities | $290.6 million | $351.7 million | (17.4%) |
| Backlog | $20.8 billion | $20.61 billion | 0.9% |
| Bookings | $2.68 billion | $2.94 billion | (9%) |
| Return on equity | 17.2% | 16.9% | 30 basis points |
| Return on invested capital | 14.7% | 14.4% | 30 basis points |
Should you buy CGI on the dip?
It was a decent quarter overall for CGI, but the results came in mixed compared with the consensus estimates of analysts polled by Thomson Reuters, which called for adjusted EPS of $0.94 on revenue of $2.78 billion, so that’s why I think its stock has fallen by over 3%. That being said, I think the decline represents an attractive entry point for long-term investors, because the stock now trades at more attractive valuations, including just 17.4 times fiscal 2017’s estimated EPS of $3.70 and only 16 times fiscal 2018’s estimated EPS of $4.02; these multiples are inexpensive given its projected 8.2% EPS growth in 2017, its projected 8.6% EPS growth in 2018, and its estimated 7.2% long-term growth rate.
With all of the information provided above in mind, I think Foolish investors should consider using the post-earnings weakness in CGI to begin scaling in to long-term positions.
