It’s up 55%, but CGI Group still has upside, says Cormark

Cormark analyst Richard Tse says CGI Group’s (CGI Group Stock Quote, Chart, News: TSX:GIB.A) strong Q3 results prove that even though it is up 55% year-to-date, there is plenty of upside left in Canada’s most valuable tech stock.

This morning, prior to the market open, CGI Group released its Q3, 2013 financials. The company earned $178.2-million on revenue of $2.57-billion, up 141% over last year’s Q3 topline.

Tse says the quarter matched his expectations on revenue, and beat his earnings expectations. CGI earned $.63 a share, while Tse’s, and the street consensus expectation, was at $.58. Bookings of $2.8-billion thoroughly bested his expectation of $1.8 to $2.0-billion.

Tse, who raised his target by five dollars to $40 last week, today raised his target again, this time by two more dollars, to $42.

He says that while he had been predicting progressively improving margins, the pace of the improvements from the Logica acquisition are outstanding, underscoring an “acquisition template” that CGI has applied effectively in recent years.

The Cormark analyst says cost integration synergies remains as one of what he believes are three bullish drivers of CGI stock over the next twelve months. He thinks product synergies and organic growth from CGI’s existing government and commercial business will also pace the company.

Tse says the most impressive part of the quarter was CGI’s bookings of $2.8-billion. Not only did this come against the headwind of sequestration in the U.S., but it diversified geographically and vertically.

CGI closed the $3.3-billion acquisition of London-based IT company Logica last August. The Montreal-based company is now the sixth-largest IT services provider in the world, and has surpassed BlackBerry as Canada’s most valuable technology stock.