With stocks off to their worst start to a year in history, investors across multiple sectors have found there aren’t a lot of safe havens. But Dundee Capital Markets analyst Eyal Ofir says Canada’s CGI Group (CGI Group Stock Quote, Chart, News: TSX:GIB.A) is a safe port in a menacing storm.
In a research update to clients today, Ofir maintained his “Buy” rating on CGI Group, but raised his one-year target price on the stock from $60 to $65, implying a return of 14 per cent at the time of publication. The analyst says the company’s recent fourth quarter results have made him more optimistic about its prospects for the future.
“We are becoming more bullish on CGI following solid Q4/F2015 results that provided a combination of strong revenue, margins, adjusted EPS, and more importantly, robust bookings in a traditionally weaker quarter,” says Ofir. “The book-to-bill strength coming out of the CGI Federal business along with further industry commentary suggesting strong outlook for IT services and solution providers into the US Federal Government provide us with reason to have a stronger outlook for the next two years. In addition, we believe that Europe is now set for growth.”
On November 11, CGI reported a Q4 in which it posted net earnings of $232.9 million on revenue of $2.6 billion, up 9 per cent and 4.1 per cent, respectively. CEO Michael Roach said the company’s financial strength is allowing it to continue its “build and buy” strategy, which he thinks will continue to fuel growth.
Ofir says another thing CGI’s balance sheet can support is M&A. He estimates the company could pull off an acquisition in the $2-5 billion range, a move that could add between $4 to $15 per share in equity value to common shareholders.
Shares of CGI Group on the TSX closed today 1 per cent to $54.14.
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