Identifying Comparables and Estimating Equity Value Using PE

Assume that your superior requests that yos estimate the equity intrinsic value of CGI Group Inc. using PE ratios for comparable companies$-$CG$1$ Group is one of the world's largest information technology and business process services companies. The following data are available. Noter. T$4$Q refers to the trailing $4$ quarters amount.

$\backslash$table$[[$Ticker$,$Market Cap $($$ mil.$),$Forward PE$,$EPS $5-$Year Historical Growth Rate,ROE $($T$4$Q$),$Debr$-$to$-$Equity $($Prior C$)],[$GIB$,-,-,16\mathrm{.}52\%,18\mathrm{.}14\%,0\mathrm{.}38],[$EQDX$.,$$$48,550,88\mathrm{.}91,18\mathrm{.}99\%,6\mathrm{.}45\%,1\mathrm{.}10],[$JCOM$,4,344,12\mathrm{.}63,2\mathrm{.}71\%,13\mathrm{.}97\%,1\mathrm{.}04],[$NTES$,33,660,19\mathrm{.}75,5\mathrm{.}23\%,18\mathrm{.}68\%,0\mathrm{.}27],[$CDW$,17,160,9\mathrm{.}08,38\mathrm{.}04\%,68\mathrm{.}32\%,3\mathrm{.}50],[$IT$,12,920,40\mathrm{.}35,(7\mathrm{.}28)\%,24\mathrm{.}26\%,2\mathrm{.}26],[$LDOS$,12,370,18\mathrm{.}27,14\mathrm{.}69\%,19\mathrm{.}61\%,0\mathrm{.}90],[$EPAM$,9,971,34\mathrm{.}39,27\mathrm{.}11\%,19\mathrm{.}36\%,0\mathrm{.}02],[$DXC$,8,106,4\mathrm{.}25,(6\mathrm{.}57)\%,10\mathrm{.}31\%,0\mathrm{.}82],[$CACI$.,5,635,18\mathrm{.}52,13\mathrm{.}11\%,11\mathrm{.}80\%,0\mathrm{.}70]]$

Required

a$.$ Identify the set of companies you plan to use as comparables. Hint: Consider cach company on the basis of growth and financial risk.

b$.$ Estimate the equity intrinsic value of CGI Group. Its carnings estimate is $$958$ million.

c$.$ Prepare a memorandum to your superior identifying any issues that you believe should be considered before using the equity intrinsic value from part $b$ for business decisions.