CGI Group still has double-digit upside, says Cantor Fitzgerald

Canada’s CGI Group (CGI Group Stock Quote, Chart, News: TSX:GIB.A) has enjoyed an extended multi-year run in its share price, but Cantor Fitzgerald Canada analyst Ralph Garcea says the company’s most recent quarterly results are evidence that the party isn’t over.

Yesterday, CGI reported its fourth quarter and fiscal 2015 results. In its Q4, the company posted net earnings of $232.9-million on revenue of $2.6-billion, a topline that was up 4.1 per cent over the same period last year.

“I am very pleased with the strong performance delivered in the fourth quarter and throughout fiscal 2015,” said CEO Michael Roach. “The operations generated record net earnings of $1.0-billion, cash of $1.3-billion and earnings per share grew by 13 per cent to $3.04. This consistent financial strength positions us to continue investing in our build-and-buy strategy, forming the foundation for profitable growth through fiscal 2016 and beyond.”

Garcea says CGI finished the year off strong, noting that the company bested his expectations on earnings, EBITDA and revenue. The analyst says CGI’s growth-through-acquisition strategy has plenty of runway left to deliver higher margin returns.

“With a pipeline of $20B+, CGI is well positioned to grow its IP-related business to ~30% of revs over the next three to five years (big data analytics, cybersecurity, procurement, trade flows, etc.) – which should expand margins,” says Garcea.

In a research update to clients today, Garcea maintained his “Buy” rating and one-year target price of $67.00 on CGI Group, implying a return of 24% at the time of publication.

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