Q: In August of 2019, between "TRI" (at $80/per share) and "GIB.A" (at $101/per share), based on P/E valuation, I bought "GIB.a". Then three years later, in August, 2022, I compared both companies share performance, "TRI" went up 90% while "GIB.a" share price was in sleeping bag, almost the same as I bought 3 years ago. Considering no dividends while waiting, so I sold "GIB.a" and bought "TRI" which I am still happy with the switch. However, since beginning of this year, GIB.A left the sleeping bag and started moving up, and share price has gone up almost 30%. I wonder if you could help me understand what’s the reasons behind the move, worth to buy at current level? Thanks.
5i Research Answer:
MH GIB.A’s share price performance is largely affected by two key fundamentals drivers:
- Earning growth, GIB.A just reaccelerated growth in recent quarters through acquisitions and price increases.
- Share repurchases historically have been the key way to return capital to shareholders at GIB.A, which is more effective when share prices go down or sideway as it was the case before this year (cancelling more shares for the same dollars spent)
Overall, the recovery in share price of GIB.A is driven mainly by fundamental improvement not multiple expansion. GIB.A is trading at 18x Forward P/E (historical averages ranging from 16x to 20x), we think this is a fair value and would be okay to add at this price.