CGI (TSE:GIB.A) Hasn't Managed To Accelerate Its Returns

To find a multi-bagger stock, what are the underlying trends we should look for in a business? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. That's why when we briefly looked at CGI's (TSE:GIB.A) ROCE trend, we were pretty happy with what we saw.

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Return On Capital Employed (ROCE): What Is It?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for CGI:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.18 = CA$2.6b ÷ (CA$20b - CA$5.1b) (Based on the trailing twelve months to September 2025).

So, CGI has an ROCE of 18%. In absolute terms, that's a satisfactory return, but compared to the IT industry average of 9.6% it's much better.

Check out our latest analysis for CGI

In the above chart we have measured CGI's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering CGI for free.

The Trend Of ROCE

While the current returns on capital are decent, they haven't changed much. The company has consistently earned 18% for the last five years, and the capital employed within the business has risen 21% in that time. 18% is a pretty standard return, and it provides some comfort knowing that CGI has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

The Key Takeaway

In the end, CGI has proven its ability to adequately reinvest capital at good rates of return. However, over the last five years, the stock has only delivered a 28% return to shareholders who held over that period. That's why it could be worth your time looking into this stock further to discover if it has more traits of a multi-bagger.

CGI could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for GIB.A on our platform quite valuable.

While CGI isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.