Having produced a banner year so far, CGI Group (CGI Group Stock Quote, Chart TSX:GIB.A, NYSE:GIB) is now in the middle of a sizeable pullback, which presents investors with an excellent entry point to a solid tech sector buy, says Christine Poole, CEO and managing director at GlobeInvest Capital Management.
“They have systems consulting and outsourcing,” Poole told BNN Bloomberg Wednesday. “The outsourcing side of their business is long, reoccurring revenues so that’s more of a defensive, cash flow stream, especially if we go into a downturn because they’re long-term contracts.”
“And they’re seeing good growth in consulting and a lot of their vertical markets because as we get more online and Internet-based, with cybersecurity and having to digitize your processes. There are a lot of things that companies have to put in place to make sure that the interface is there. So, they’re seeing good growth,” she says.
Montreal-based CGI announced this week that it will open a new digital innovation centre in Drummondville, Quebec, which will create about 300 high-tech jobs over the next five years. The centre is expected to focus on the finance, retail and manufacturing sectors.
In the company’s last quarter, CGI reported a four per cent revenue growth rate along with a nine per cent uptick in operating cash flow. Diluted earnings per share reached $1.08 per share, a 16 per cent year-over-year increase. The company stated that its bookings had hit $3.5 billion or 118 per cent of revenue while its backlog grew to $22.4 billion.
CGI’s share price has been on a steady rise for years and is up 13.8 per cent for 2018 — that’s including a recent slide which has seen the stock drop by almost ten per cent over the past two weeks, closing on Wednesday at $77.39.
“We own CGI and we’ve owned it for a number of years in our client portfolio,” says Poole. “I was actually waiting for a pullback in the stock to buy it for some of our newer clients. We added to some of those portfolios when the stock got down to below $78. With its most recent pullback, I think it’s an attractive entry point.”