With a large pipeline of business and margins back to where they were before the acquisition of Logica, things are looking great for CGI Group (TSX:GIB.A), says Cantor Fitzgerald Canada analyst Ralph Garcea.
On Wednesday, CGI reported its Q2, 2015 results. The company earned $251.2-million on revenue of $2.6-billion.
“Our focus on operational excellence continues to deliver significant business value to our clients and superior returns to investors over time,” said CEO Michael Roach. “Our financial performance in the quarter and first six months of fiscal 2015, coupled with our strong balance sheet reinforces our ability to continue executing our build and buy global growth strategy.”
Garcea says that despite deals being delayed in the government segment in both the U.S. and the U.K., things have never looked more promising for CGI Group. The analyst believes the timing is right for the company to pull the trigger on another transformational deal, he notes that it has more than $2-billion in available capital to do so.
Noting that the company’s current pipeline stands at more than $10-billion, the analyst detailed some of the other positives currently in play for CGI.
“From a margin perspective, we see the weaker C$ benefiting CGI’s nearshore strategy of serving U.S. clients from Canadian operations,” said Garcea. “In addition, we see further margin expansion in the U.S. as CGI rolls out its new delivery center in Lafayette, Louisiana in addition to the three other centers in Lebanon, VA, Troy, AL and Belton, TX.
In a research update to clients yesterday, Garcea maintained his “Buy” rating but raised his one year target price on the stock from $60.00 to $67.00, implying a return of 30% at the time of publication.