CGI Group has tons of upside, Keith Richards says

Keith RichardsCGI Group (TSX:GIB.A, NYSE:GIB) may be in for a pullback over the short-term, says Keith Richards, portfolio manager and technical analyst for ValueTrend Wealth Management, but investors will likely be pleased by this stock’s performance going forward.

As far as current Canadian tech sector success stories go, Shopify is likely a name that comes to mind, but IT services and consulting company CGI should, too. A company whose roots now trace back over four decades, CGI’s stock has taken off like a shot over the past six months, hitting a new record high of $85.03 in trading on Monday. So far, the stock is up 25 per cent in 2018.

Richards argues that from a technical point of view, the long lead up to this year’s gains bodes well for CGI.

“It’s been on fire,” Richards told BNN Bloomberg Monday. “The stock had really been a go-nowhere stock for a long time. You can see that big consolidation between 2016 and early 2018. And it’s just popped.”

“The greater the base, the better the case, is the expression within technical analysis,” says Richards. “This base breakout is where we bought it in late 2017.”

CGI has seen good organic growth over recent quarters, with its Q2 earnings of early May boasting a profit of $274.4 million on revenue growth of 8.3 per cent compared to the second quarter of 2017. Its EPS was $1.04 compared to $0.91 a year ago, while the company posted a backlog of $22.0 billion as of March 31.

“I think it’s got tons of upside,” says Richards. “Sure, it’ll pull back. It’s a little overbought. It’ll probably pull back to the short-term trend line. It might pull back a buck or two. The breakout is awesome, the new trend is good, and I think it’s got lots of legs, lots of upside ahead of it.”