CGI Group is moving up the value chain, says National Bank Financial

Ahead of the company’s Q1, 2017 results, National Bank Financial analyst Richard Tse is feeling bullish about CGI Group (CGI Group Stock Quote, Chart, News: TSX:GIB.A, NYSE:GIB).

On Wednesday, February 1, CGI will report its first quarter, 2017 results. Tse expects the company will post EPS of $0.89 on revenue of $2.7-billion, basically in-line with the street consensus of EPS of $0.91 on a topline of $2.7-billion.

Tse says he doesn’t see any surprises coming from CGI because of the company’s “highly disciplined” operating group. While the stock could be accused of as having a distinct lack of excitement, he sees undercurrents bringing higher value services resulting in a margin expansion.

“We believe CGI is moving up the value chain with an increasing proportion of revenue from intellectual property (IP) and digital, organically built and acquired. We like CGI’s defensive attributes and the obvious optionality from M&A, particularly given a consistent record of execution.” says the analyst.

In a research update to clients today, Tse maintained his “Outperform” rating and one-year price target of $76.00 on CGI Group.

Tse thinks CGI will generate EBITDA of $2.06-billion on revenue of $11.04-billion in fiscal 2017. He expects these numbers will improve to EBITDA of $2.14-billion on a topline of $11.44-billion the following year.